R v Registrar General, ex parte Segerdal and Another

[1970] 1 All ER 1

Categories:        ECCLESIASTICAL        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD PARKER CJ, ASHWORTH AND CANTLEY JJ        

Hearing Date(s):        4, 5, 14 NOVEMBER 1969        

Ecclesiastical law – Place of meeting for religious worship – Chapel of Church of Scientology – Powers of Registrar General in deciding whether or not to grant certificate — Whether decision of Registrar General open to review by Queen’s Bench Divisional Court – Burden of proof on applicant to show place in question is place of meeting for religious worship – Places of Worship Registration Act 1855, s 2.

Where a certificate that a place is a place of meeting for religious worship is applied for under s 2a of the Places of Worship Registration Act 1855, the Registrar General is not only entitled but bound to enquire whether the place mentioned in the certificate is indeed a place of meeting for religious worship; his function being not merely ministerial (see p 6 b and p 10 j, post). His decision, however, is open to review by the Divisional Court of the Queen’s Bench Division, which will then decide for itself, the burden being on the applicant, whether the place in question is a place of meeting for religious worship (see p 3 d, p 6 j to p 7 a, and p 10 j, post).

S was a minister of the Church of Scientology of California, USA, which had premises in England. He applied to the Registrar General under s 2 of the Places of Worship Registration Act 1855 for a certificate that a chapel on those premises was a place of meeting for public worship, and that the chapel be recorded as such in the book kept for that purpose by the Registrar General under s 3b of that Act. Two booklets were put forward in support of the application, ‘Ceremonies of the Founding Church of Scientology’ and ‘Scientology and the Bible’. The first-named booklet showed that prayers were not used and, although the service was to be conducted with dignity and order, it need not be solemn and ‘reverent’; music might be played before and after the service, and there was to be a sermon on some phase of Scientology, but there was no reference to the Scientologists’ creed and, in particular, to its being recited aloud or in silence. The second booklet said that Scientology was open to people of all religious beliefs and was an organisation serving as a meeting point through which such persons might better appreciate their spiritual character. On an application for mandamus directed to the Registrar General to register the chapel as a place of meeting for religious worship, the court considered an affidavit by S in which he averred that a choir sang at services, but did not state what they sang, that one or either of the creeds of the Church were the only prayers in regular use—they being read by the chaplain aloud and the congregation silently—and that after the sermon there was a moment’s silence for contemplation or prayers. He also stated that there were other religious services at the chapel, such as christenings or naming ceremonies, funeral services and (after marriage at a registry office) wedding ceremonies. He finally stated that the purpose of all services and ceremonies and, indeed, the existence of the chapel was for the congregation and minister collectively and individually thereby to recognise, worship, honour and express reverence for God, and for the congregation to hear a sermon by a minister on the teachings and

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practices of Scientology, and that, to the best of his understanding and belief, the meetings for religious worship at the chapel were for religious worship in every sense of the word. S was not cross-examined regarding the last statement, and the court did not accept it.

Held – The application would be refused, because there was nothing in the description of the service in the booklet to indicated that it was a service of religious worship (see p 9 c, and p 10 j, post), and, despite the additional evidence contained in S’s affidavit, the Registrar General was fully justified in refusing to register the chapel as a place of meeting for religious worship (see p 10 g and j, post).

Notes

For the registration of places or worship, see 13 Halsbury’s Laws (3rd Edn) 32, para 48, 530, para 1140, and for a case on the subject, see 19 Digest (Repl) 577, 4175.

For the Places of Worship Registration Act 1855, ss 2 and 3, see 10 Halsbury’s Statutes (3rd Edn) 1504, 1505.

Cases referred to in judgment

Associated Provincial Picture House Ltd v Wednesbury Corpn [1947] 2 All ER 680, [1948] 1 KB 223, [1948] LJR 190, 177 LT 641, 112 JP 55, 45 Digest (Repl) 215, 189.

Church of Jesus Christ of Latter-Day Saints v Henning (Valuation Officer) [1963] 2 All ER 733, [1964] AC 420, [1963] 3 WLR 88, 127 JP 481, Digest (Cont Vol A) 1287, 376a.

Green v Pope (1696) 1 Ld Raym 125, 91 ER 980, 16 Digest (Repl) 386, 1749.

R v Derby Justices (1766) 1 Wm Bl 606, 96 ER 352, 19 Digest (Repl) 577, 4175.

R v Income Tax Special Purposes Comrs (1888) 21 QBD 313, 53 JP 84, sub nom R v Income Tax Special Comrs, Ex parte Cape Copper Mining Co Ltd [1886–90] All ER Rep 1139, 57 LJQB 513, 59 LT 455, 28 Digest (Repl) 403, 1792.

Cases also cited

Adelaide Co of Jehovah’s Witnesses v The Commonwealth (1943) 67 CLR 117.

British Advent Missions v Vane (VO) and Westminster City Corpn (1954) 48 R & IT 60.

Founding Church of Scientology of Washington DC v United States (5 February 1969) unreported.

R v Lincolnshire Justices, Ex parte Brett [1926] 2 KB 192, [1926] All ER Rep 275.

United Dominion Trust Ltd v Kirkwood [1966] 1 All ER 968, [1966] 2 QB 431.

Motion for mandamus

This was an application by way of motion by Michael Segerdal and the Church of Scientology of California for an order of mandamus directed to the Registrar General at the General Register Office, Somerset House, London WC2, that he record or cause to be recorded the chapel at Saint Hill Manor, East Grinstead, Sussex, as a place of meeting for religious worship certified to him under the Places of Worship Registration Act 1855 in the book kept by him for that purpose, pursuant to s 3 of the 1855 Act. The facts are set out in the judgment of Ashworth J.

Quintin Hogg QC and Gavin Lightman for the applicants.

R J Parker QC and Gordon Slynn for the Registrar General.

Cur adv vult

14 November 1969. The following judgments were delivered.

ASHWORTH J. In these proceedings, counsel moves on behalf of one Segerdal and the Church of Scientology of California for an order of mandamus that the Registrar General do record or cause to be recorded the chapel at Saint Hill Manor, East Grinstead, as a place of meeting for religious worship certified to him under the Places of Worship Registration Act 1855. It will be necessary to consider the Act (hereinafter referred to as the 1855 Act) in some detail, but in order to indicate the three main issues which have been fully and ably argued before the

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court, it is sufficient to state that, under the provisions of ss 2 and 3, places of meeting for religious worship may be certified to the Registrar General who is placed under a duty to record all such places, so certified, in a book kept for that purpose.

The first main issue may be expressed in the form of two questions: (a) when a certificate that a place is a place of meeting for religious worship is sent to the Registrar General, is he entitled, before recording the place in his register, to consider for himself whether the place is used or is intended to be used as a place of meeting for religious worship? or (b) is the certificate conclusive evidence on that point, so that the Registrar General is under a statutory duty to record the place without any enquiry as to the correctness of the certificate? It is common ground between the parties that, if the answer to question (b) is yes, no further issue arises and the present applicants are entitled to the order which they seek. But if the answer to question (a) is yes, the second main issue arises which may likewise be expressed in the form of two questions: (c) if the Registrar General declines to record a place on the ground that it is not a place of meeting for religious worship, is his decision conclusive, unless it can be shown that it was reached in contravention of well-established principles, expressed in varying forms in many cases, of which Associated Provincial Picture Houses Ltd v Wednesbury Corpn ([1947] 2 All ER 680 at 682, [1948] 1 KB 223 at 228, 229) is a well-known example? or (d) is his decision open to review by this court which will then decide for itself, the burden being on the applicant, whether the place in question is a place of meeting for religious worship? The third main issue may likewise be expressed in the form of two questions: (e) if the answer to question (c) is yes, has it been shown that the decision of the Registrar General was reached in contravention of the principles referred to? (f) if the answer to question (d) is yes, is the place in question a place of meeting for religious worship?

The answer to the questions included in the first main issue depends ultimately on the construction of the 1855 Act, but counsel for the applicants relied strongly on earlier legislation as an indication of its meaning and accordingly reference must be made to some of those earlier Acts. By s 19 of the Toleration Act 1688 it was provided:

‘… that no congregation or assembly for religious worship shall be permitted or allowed by this act, until the place of such meeting shall be certified to the bishop of the diocese, or the archdeacon … or to … quarter sessions … and registered in the … bishop’s or archdeacon’s court … or recorded at … quarter sessions, the register or clerk of the peace whereof respectively is hereby required to register the same … ’

The next Act to call for specific mention is the Places of Religious Worship Act 1812. By s 2 of that Act it was provided that:

‘… from and after the passing of this Act no congregation or assembly for religious worship of protestants (at which there shall be present more than twenty persons besides the immediate family and servants of the person in whose house … such meeting, congregation, or assembly shall be had) shall be permitted or allowed, unless and until the place of such meeting [if not already certified and registered] … shall be certified to the bishop … or … archdeacon or … quarter sessions … ’

It was further provided that ‘the registrar or clerk of the peace’ … respectively is hereby required to register and record the same … ’. The section also provided a penalty for anyone who should knowingly permit or suffer any such congregation or assembly to meet in any place occupied by him until the same should have been certified as aforesaid. In passing, it may be noted that this section is specifically directed to Protestants and, although the question whether the applicants and their adherents can properly be described as Protestants was not argued (nor is it necessary

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to decide it), it is exceedingly doubtful whether they come within the section. Although it is not necessary to refer to them in detail, mention should be made of the fact that there were also other Acts of Parliament, the effect of which was to relieve Roman Catholics and Jews from penalties for meeting together, but no reference was made to any other Act under which the applicants or their adherents might be subject to such penalties.

In 1852, an Actc was passed by which registration or recording in a bishop’s or archdeacon’s court or at quarter sessions was replaced by recording by the Registrar General. Again it may be noted that s 1 of this Act was directed to ‘Protestants dissenting from the Church of England’. Three years later there came the 1855 Act, the short title of which is ‘An Act to amend the Law concerning the certifying and registering of Places of Religious Worship in England. The amending character of this Act is manifest; for example, it includes within its scope ‘any place of meeting for religious worship of any other body or denomination of persons’, it provides for notice of disuse and cancellation of the record of certification, and it provides for exemption from certain statutory provisions relating to charities. As counsel for the Registrar General put it, the intention of the 1855 Act was to make the Registrar General’s book a living register, whereas the general intention of the earlier legislation was to relieve dissenters, Roman Catholics and Jews from liability for worshipping together. If the Registrar General’s book was indeed to be a living register, it would be important: (a) not to include a place that was not a place of meeting for religious worship; and (b) to remove from it a place that had ceased to be used as such.

Before examining the 1855 Act, reference must be made to two cases on which counsel for the applicants placed great reliance. The first is R v Derby Justices decided in 1766. This was a motion for mandamus to register a certain tenement which was certified to quarter sessions as a place set apart for the meeting of Protestant dissenters. The motion was resisted on three grounds, but the decision, as reported ((1766) 1 Wm Bl at 607), was that ‘in registering and recording the certificate the justices were merely ministerial’. For my part, I do not regard that decision as conclusive on this first main issue. In the first place, the question whether the tenement was a place of meeting for religious worship was not in issue; the main ground on which the motion was resisted was that the persons certifying had not shown under what denomination of Protestant dissenters (for whose relief the Toleration Act 1688 was expressed to be passed) they fell, and I can well understand a court saying in effect that this did matter and that, so long as they were Protestant dissenters, the clerk of the peace had no option but to register the tenement. In such circumstances, it might not unfairly be said that the justices were merely ministerial. Secondly, it seems to me that the 1855 Act gave effect to a change of policy, so that emphasis was laid on places rather than persons. Moreover, the 1855 Act is not limited to Protestants but applies to any body of persons meeting for religious worship, whether or not they required protection, and, as will be seen later, the Act in addition afforded privileges in respect of places registered under it. Thirdly, the language used in the 1855 Act seems to me to negative the idea that the function of the Registrar General is purely ministerial and in particular provided that, as a precondition of certification, the place must be a place of meeting for religious worship. The other case is Green v Pope but, in my view, it is unnecessary to examine it in detail, since the point now under consideration was not the issue. The action was brought for making a false return to mandamus, and the question whether the defendant (who was the bishop’s registrar) was bound to register a certificate was not argued or decided.

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It is now necessary to examine the 1855 Act. The material words of ss 2, 3 and 4 are as follows:

‘2. Every place of meeting for religious worship … of any other body or denomination of persons, may be certified in writing to the Registrar General …

‘3. The said Registrar General shall cause all places … for religious worship certified to him under this Act to be recorded in a book …

‘4. Any place of meeting for religious worship heretofore certified and registered or recorded in manner required by law, and which continues to be used for religious worship, save any such place of meeting certified to the said Registrar General under the said Act [of 1852], may … be certified in writing to such Registrar General … and shall be recorded by [him] … ’

The effect of these three sections may be summarised thus: under ss 2 and 3, places of meeting for religious worship not previously certified and registered might be certified to the Registrar General and recorded by him, irrespective of the faith or denomination of the worshippers; under s 4, places of meeting for religious worship which had previously been certified and registered in this bishop’s court or at quarter sessions might, if they continued to be used for religious worship, be certified to the Registrar General and recorded by him. In cases falling under s 2, there was one precondition to registration, namely, that the place should be a place of meeting for religious worship; in cases under s 4, there were two preconditions, namely, previous registration and continued use.

Section 6 introduced a new requirement, namely, notice to the Registrar General whenever a place of meeting for religious worship, certified under the 1852 Act or the 1855 Act, wholly ceased to be used as such. By s 8, it is provided:

‘Whenever it shall appear to the satisfaction of the said Registrar General, from any notice [under s 6] or otherwise, that any certified place of meeting for religious worship has wholly ceased to be used as such, [he] shall cause the record of such certification to be cancelled, and shall give public notice of the cancellation … and after such cancellation and publication … such place shall cease to be deemed duly certified as by law required, and shall so remain until it shall have been duly certified afresh under this Act.’

Section 9 introduced a new advantage for places of meeting for religious worship certified under the 1852 Act or the 1855 Act. Relief from rates had been conferred by the Poor Rate Exemption Act 1833, and by s 9 of the 1855 Act, to quote the sidenote, ‘Certified places shall be exempted from the operation of 16 & 17 Vict c 137’ (now replaced by the Charities Act 1960). Section 11 is of importance by reason of its language:

‘The Registrar General … shall, with respect to any place certified to him as a place of meeting for religious worship, the record whereof remains uncancelled give, … a certificate … ’

If similar language had been used in s 2, the precondition to registration would have been a certificate that the place was a place of meeting for religious worship instead of being (as already pointed out) the fact that the place was a place of meeting for religious worship.

In 1949, a further advantage was made available for places of meeting for religious worship, certified as required by law. By s 41 of the Marriage Act 1949:

‘(1) Any proprietor or trustee of a separate building, which has been certified as required by law as a place of religious worship may apply … for the building to be registered for the solemnization of marriages therein.

‘(2) Any person making such an application … shall deliver … a certificate, signed … by at least twenty householders, stating that the building has been

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used by them for at least one year immediately before the application as their usual place of public religious worship … ’

By sub-s (3), it is stated that the Registrar General shall register the building. Having examined the wording of the 1855 Act and considered the other matters already referred to, I have come to the conclusion that the function of the Registrar General, on receipt of a certificate under s 2, is not merely to register the place without more ado. His function is not, as it is often put, to place a rubber stamp on the certificate. In my view, he is not only entitled but bound to enquire whether the place mentioned in the certificate is indeed a place of meeting for religious worship. It is clear from s 8 that, in regard to cancellation, his function is not merely ministerial, and the result would be absurd if he was merely ministerial in regard to registration, but had an active role in regard to cancellation, all the more so in the light of the last words of s 8 (which provide for recertification after cancellation).

This conclusion is reinforced when it is realised that the effect of registration is not merely to relieve persons from penalties for practising their religious belief; on the contrary, registration opens the door to other advantages and, in my view, Parliament cannot be supposed to have intended that such advantages were to be obtained merely on the certificate of the persons most interested in obtaining them without any provision being made for checking the correctness of the certificate. Accordingly, in my judgment, on the first main issue question (a) should be answered yes, and question (b) no.

The second main issue can, I think, be dealt with more shortly. The issue raises yet again the problem discussed by Lord Esher MR in the classic passage of his judgment in R v Income Tax Special Purposes Comrs ((1888) 21 QBD 313 at 319, 320, [1886-90] All ER Rep 1139 at 1141). That passage does not, however, provide any guidance as to the test which should be applied when a court is considering into which class of the two described by Lord Esher MR a particular body or person falls; and counsel on neither side was aware of any reported case in which a test been laid down. For my part, I do not find it necessary to venture on the task; as has been said before, while it may be difficult to draw the line, it may not be difficult to say on which side of the line a given case falls.

Counsel for the Registrar General contended that the Registrar General’s decision could only be challenged on the restricted grounds referred to in the Wednesbury Corpn case. In support of this contention he relied particularly on ss 4, 6 and 8 of the 1855 Act which all involve matters other than the fundamental question whether the place is a place of meeting for religious worship; continued use in s 4 and cessation of use in ss 6 and 8 are matters of fact which might naturally be committed to the Registrar General for decision and, according to this argument, the matter is virtually concluded by the reference in s 8 to his being satisfied. Counsel for the Registrar General submitted that, if cessation of use was a matter on which the Registrar General’s satisfaction was prima facie decisive, the same position must have been intended in regard to certification, or the Act would be reduced to a farce. For my part, I cannot agree with counsel for the Registrar General’s argument on this issue. Assuming that in regard to cancellation the Registrar General’s decision is only open to limited challenge, the possibility of the place being certified afresh in pursuance of s 8 does not affect his power to refuse to register the fresh certificate. Such refusal would then be open to challenge on wider grounds but there would be nothing absurd in this result. Although, as already indicated, the Registrar General is not merely ministerial, there is no occasion to place him at the other end of the scale, and, if that had been the intention of Parliament, different language would have been used in s 2. As I understood it, counsel conceded that, so far as that section is concerned, it is difficult to sustain the argument now being considered, and I agree with him. Indeed, I go further; in my view, it is impossible. Accordingly,

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in my judgment, on the second main issue question (c) should be answered no, and question (d) yes.

The third main issue, which now falls to be considered, involves an examination of the evidence placed before the court in the form of affidavits and exhibits thereto. The first-named applicant, Michael Segerdal, states in his affidavit that he is a minister of the Church of Scientology and that he is the acting chaplain of the chapel, Saint Hill Manor, East Grinstead. The second-named applicant, the Church of Scientology of California, is a society incorporated under the law of the State of California. It was incorporated in 1954, and its articles of incorporation are included in an exhibit to Mr Segerdals’ affidavit. Events leading up to the present proceedings began in January 1967 when application was made on behalf of the applicants for forms relating to the registration of the chapel as a place of worship for the solemnisation of marriage. There followed during 1967 and 1968 correspondence between the applicants and their legal advisers on the one hand and representatives of the Registrar General on the other, and all the relevant letters are to be found in an exhibit to Mr Jeffery’s affidavit filed on behalf of the Registrar General. In the course of this correspondence there were supplied by the applicants two booklets, one entitled Ceremonies of the Founding Church of Scientology, the other entitled Scientology and the Bible, and it will be necessary to refer to both of them. Having failed by correspondence to persuade the Registrar General to record the chapel in pursuance of ss 2 and 3 of the 1855 Act, the applicants on 9 May 1969 obtained leave to move for an order of mandamus and in support of that application there was filed the affidavit of Mr Segerdal.

At the outset it is worth emphasising that the issue is whether the chapel at Saint Hill Manor is a place of meeting for religious worship. It is conceded that the chapel is a place of meeting and, accordingly the all-important words are ‘for religious worship’. Counsel for the Registrar General stressed the word ‘for’ as indicating that the place must be a place for the purpose of religious worship. No doubt religious worship may occur in a great variety of places, and it does not follow that, because religious worship occurs in a given place, such place is without more a place of meeting for religious worship. On the other hand, a place may be a place of meeting for religious worship despite the fact that on occasions it is used for some other purpose.

It was said in the course of argument both in regard to religious or religion and in regard to worship that it is easier to recognise than to define. In Church of Jesus Christ of Latter-Day Saints v Henning (Valuation Officer) ([1963] 2 All ER 733 at 735, [1964] AC 420 at 431) (in which the words ‘public religious worship’ fell to be considered), Lord Evershed said:

‘What in such a context is meant by the word “worship”? I am content to take the relevant meaning given in the Shorter Oxford Dictionary, namely, “the actions or practices of displaying reverence or veneration to a being regarded as Divine by appropriate … rite or ceremonies” … ’

For the purposes of Henning’s case, that definition was no doubt sufficient, and, indeed, there was no dispute in that case regarding the word ‘worship’; the issue was whether worship, which admittedly took place, was public. Whether the definition in question is wide enough or not, it does at least serve to indicate that, for worship to take place, there must be both a worshipper and an object of his worship. In ordinary parlance, no doubt, a worshipper is directing his worship to a person or being regarded as divine but, in my view, for the purposes of this case, it is unnecessary to attempt any precise definition of the range within which objects of worship properly so called can be included. The important point to my mind is that there must be an object. Section 2 refers not merely to worship but to religious worship, and while it is, perhaps, difficult to think of worship as being other than religious worship, the

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inclusion of the word religious involves the requirement that there must be some religion with which the worship is associated. The relevance of this point in the present case is that it is a matter of controversy whether Scientology is a religion at all.

In the booklet Scientology and the Bible there appears the following:

‘Scientology is a religion in the oldest sense of the word, a study of wisdom. Scientology is a study of man as a spirit, in his relationship to life and the physical universe. It is non-denominational. By that is meant that Scientology is open to people of all religious beliefs and in no way tries to persuade a person from his religion, but assists him to better understanding that he is a spiritual being … ’

Notwithstanding the first four words of this quotation, I find it is very difficult indeed to extract from the remainder anything to justify them. The idea presented to my mind by the quoted words is of an organisation serving as a meeting point or clearing house for persons of all religious beliefs, through which people may better appreciate their spiritual character. While Scientology may be wholly admirable, I find it difficult to reach the conclusion that it is a religion. That does not, however, conclude the matter, because, even if Scientology were not a religion itself, the chapel could still be a place of meeting for religious worship if persons met there to worship according to their own religious beliefs. Accordingly, if I were able to hold that the chapel at Saint Hill Manor is a meeting place for worship, I should not let my doubts as to the religious aspect of such worship defeat the applicants, and I understood counsel for the Registrar General to take much the same view when he said that the question whether the worship was religious was of marginal importance.

Counsel for the Registrar General submitted that, when one is considering for what purpose people meet in a particular place, there are two reliable guides: (a) what happens when they go to the place; and (b) what any published literature tells them is going to happen when they do meet. In the present case, the second of these guides may, I think, be supplemented by any information to be found in letters written by or on behalf of the applicants. On 17 February 1967 a letter was written on behalf of the Registrar General of which the following extract formed part:

‘It would, however, be of assistance in considering your application, to be supplied with some of your literature setting out the beliefs of Scientologists, showing the form the services take and whether the congregation practises religious worship as usually defined i.e. the worship of a Supreme Being.’

The reply was dated 22 February 1967:

‘I enclose for your further information our book titled “Ceremonies of the Founding Church of Scientology“. I am sure you will find the answers to the questions you posed in the various ceremonies, and particularly in the Creed.’

This booklet, to which reference has already been made, was discussed in argument in considerable detail and in my view it is of great importance. Page 7 is headed ‘Church Service’, and on that page and the next page there is set out what occurs at a church service. It is unnecessary to set out these two pages in full and I limit quotations to the following:

‘In a Scientology Church Service we do not use prayers, attitudes of piety, or threats of damnation. We use the facts, the truths, the understandings that have been discovered in the science of Scientology … A Scientology Church Service should be conducted with dignity and order, but it need not be solemn and “reverent” … Music may, if desired, be played before and after the service. Suitable music is pleasant to listen to and not strongly associated with the wrath of the gods or helpless dependence on the whim of an unknown being. The music could come from tapes, records, piano or organ. Or no music at all may be used at the discretion of the Minister. The Church Service shall consist of the

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following: The Minister confronts the people and says hello to them. A SERMON—This is ALWAYS on some phase of Scientology and on how it can be of use to those present … A taped lecture of L. Ron Hubbard can be included as part of the service. A Q. and A. period can be held after the sermon or after the tape … The Minister may make announcements of special activities or of other services offered by the Organisation—or the local group of auditors. The Minister thanks the people for coming and invites them to return. He may ask them to try out something they have learned here as they go about living during the week.’

One of the significant features of the service described on pp 7 and 8 of the booklet is the complete absence of any reference to the creed, and, in particular, to its being recited aloud or read in silence. The creed itself is set out on pp 73 to 75 of the same booklet. Dealing for the moment only with the service so described, I can find nothing whatever to indicate that it is a service of religious worship. I appreciate fully the point made by counsel for the applicants that forms of worship vary enormously and that worship may take place without there being any set of liturgy. But when a form of service is prescribed, as it is in the booklet, one would at least expect that, if it is a service of religious worship, there would be some indication to that effect and some opportunity provided for worship, either in the form of spoken words or of silent meditation, and I can find none.

The creed itself contains two references to God:

‘And that no agency less than God has the power to suspend or set aside these rights, overtly or covertly … And we of the Church believe that the laws of God forbid man … ’

Unless it is to be found by implication in the two articles of the creed just mentioned, there is no profession in the creed of any belief in God or indeed any deity. Nor is there anything in the creed of what may be called a worshipful character, for example, stating an object of the worship which is said to take place.

Returning to the correspondence, the next letter calling for mention was written on behalf of the applicants on 28 February 1967:

‘It seems that we have run into a conflict of terms. Our knowledge and understanding of the Supreme Being is very profound. Whilst we do not have the litanical form of worship, nevertheless our services are designed for people to acquire for themselves a knowledge of God and thus realise for themselves the profundity of the worship they should undertake which they are free to do on the premises.’

The letter accords reasonably closely with the words of Mrs Mary Sue Hubbard on the opening page of the other booklet (which have already been quoted), and the impression created on my mind is that, while the service may probably be described as a service of instruction, it is not itself a service of religious worship. Nor does it become such by reason of the fact that members of the congregation are free to worship according to their own religious beliefs, if they choose to do so.

In June 1967, the applicants consulted their solicitors and the rest of the bundle of correspondence consists in the main of long letters in which the views and contentions of the parties were set out. I do not think it necessary to lengthen this judgment by referring to any of those letters. It is, however, necessary to consider the affidavit of Mr Segerdal and in particular para 7, in which he describes (inter alia) the service held every Sunday afternoon in the chapel at Saint Hill Manor. His description differs noticeably from that contained in the booklet. He refers to a choir of 20 persons under a choirmaster which sings during Sunday services, but he does not state what they sing. A more important difference arises from his statement that, after a welcoming address from the chaplain:

‘There is then read aloud by the Chaplain one or either of the Creeds of the

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Church, which are the only prayers in regular use. The congregation read the Creeds silently.’

A further important difference arises from his statement that ‘after the sermon, there is a moment’s silence for contemplation or prayer’. Presumably Mr Segerdal is familiar with the booklet Ceremonies of the Founding Church of Scientology (the last edition of which was in 1967) and the description of the service on pp 7 and 8, but there is nothing in para 7 of his affidavit to explain why his description of the service is so different, or to suggest that the description in the booklet is no longer up to date. Moreover, I find his statement that the creeds are the only prayers in general use difficult to understand; in the first place, the language of the creeds is not the language of prayer and, in the second place, according to the booklet ‘we do not use prayers’.

In para 7, Mr Segerdal further states that there are other religious ceremonies at the chapel such as christenings (or naming ceremonies), funeral services and (after marriage at a registry office) wedding ceremonies. I do not find it necessary to refer to the details of these services, as set out in the booklet; it is sufficient to say that I find it very difficult indeed to regard any of them as a religious service. Lastly, para 7 of the affidavit contains the following statement:

‘The purpose of all these services and ceremonies and indeed the existence of the Chapel is for the congregation and Minister collectively and individually thereby to recognise, worship, honour and express reverence to God, and for the congregation to hear a sermon by a Minister on the teachings and practice of scientology. To the best of my understanding and in my belief, the meetings for religious worship at the Chapel are for religious worship in every sense of the word.’

If this statement is accepted as right, there can be only one result to these proceedings, but counsel for the Registrar General in careful and restrained words submitted that, in the light of other evidence before the court, this statement should not be accepted. There has been no cross-examination of Mr Segerdal regarding this paragraph, nor has it been challenged or denied except by argument, but I have come to the conclusion that the crucial statements in the last two sentences of the paragraph cannot be accepted.

For reasons already stated, the earlier part of para 7 gives rise to considerable difficulty and uncertainty and, if the statements in the last two sentences of the paragraph really represent the purpose of the chapel and of its congregation, I should have expected this to me made clear at the start of the correspondence. Apart from Mr Segerdal’s affidavit, I have doubt at all on the third main issue and, on the information before him, I think that the Registrar General was fully justified in refusing to register the chapel as a place of meeting for religious worship. Despite the addition evidence contained in Mr Segerdal’s affidavit, I have come to the same conclusion as the Registrar General and, in my judgment, this motion fails.

CANTLEY J. I have had the opportunity of fully considering the judgment just delivered by Ashworth J; I entirely agree with it and have nothing to add.

LORD PARKER CJ. I also entirely agree.

Application dismissed.

Solicitors: Lawrence Alkin & Co (for the applicants); Solicitor, Department of Health and Social Security.

N P Metcalfe Esq   Barrister.

Practice Direction

(practice: Chancery Division: Affidavit evidence)

[1970] 1 All ER 11

PRACTICE DIRECTIONS

CHANCERY DIVISION

28 NOVEMBER 1969

Practice – Chambers – Chancery Division – Affidavit evidence – Service of copy affidavit – Time for service – Consideration whether time needed to answer – RSC Ord 28, r 3(3).

Practice – Chambers – Chancery Division – Affidavit evidence – Limitation on time for swearing further affidavits – Date of next hearing.

Practice – Chambers – Chancery Division – Telephone contact – Necessary information to be given by solicitors.

The following directions are given with the object of avoiding delay in interlocutory proceedings:

Affidavits

1. When affidavit evidence is to be adduced at the first hearing of an originating or ordinary summons a copy should be supplied to the opposite parties as early as possible. The four clear days specified by RSC Ord 28, r 3(3), in respect of an originating summons are only a minimum, which should be exceeded when practicable. Parties on whom copy affidavits have been served should be prepared to inform the master at the first hearing whether they need time to answer and should, where possible, avoid asking for adjournments to consider the question. If time allows, evidence in answer should be sworn before the hearing.

2. Every party who is to adduce evidence at the hearing must lodge it with the master’s summons clerk at least two days beforehand unless the time available is too short, in which case he must lodge it as soon as possible. Postal facilities are available for this (see Practice Direction ([1969] 1 All ER 490, [1969] 1 WLR 274) dated 4 February 1969). When a master has to adjourn because he has not been enabled to read the evidence he may make appropriate provision for costs thrown away.

Adjournment

3. For an experimental period of six months a master who limits times for swearing further affidavits will then and there fix the date of the next hearing or direct that the summons is to be restored within a given time unless there are special reasons why he should not do so. If this direction is found to cause delay through congestion of the lists and wasted appointments it may be rescinded.

4. When a master adjourns a summons into court he will direct that it be set down within a given number of days. If that period is exceeded the matter is not to be set down without leave.

Particulars of solicitors

5. To enable the master or his clerk to reach the appropriate person by telephone, should occasion arise, the solicitor who first brings a matter into chambers should then leave with the summons clerk a note of all the solicitors in the case who are known to him, their telephone numbers, and (if known) the name of the solicitor or legal executive in each firm who is in charge of the matter. Appropriate forms will be kept by the summons clerks but, if preferred, the solicitor may lodge a note already prepared.

By the direction of Buckley J.

R E Ball,   Chief Master

28 November 1969

Wright v Nicholson

[1970] 1 All ER 12

Categories:        CRIMINAL; Criminal Procedure        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD PARKER CJ, ASHWORTH AND CANTLEY JJ        

Hearing Date(s):        21, 22 OCTOBER 1969        

Magistrates – Information – Defect – Variance between information and evidence of prosecution – risk of grave injustice to accused – Whether information should be amended – Magistrates’ Courts Act 1952, s 100(1), (2).

The words of s 100(1)a of the Magistrates’ Courts Act 1952 should not be read literally as meaning that there can be no attack on an information however fundamental the defect. It depends in every case whether, for instance, the variance between it and the evidence is such as to require an amendment; where there may be grave injustice to an accused unless the information is amended, then an amendment is called for. Once this occurs, then s 100(2)b operates, which requires the court on the application of the defendant to adjourn the case (see p 14 f, and p 15 d, post).

R v Dossi (1918) 13 Cr App Rep 158 explained.

Notes

For variance between information or complaint and evidence, see 25 Halsbury’s Laws (3rd Edn) 188, para 340.

For the Magistrates’ Courts Act 1952, s 100, see 32 Halsbury’s Statutes (2nd Edn) 501.

Case referred to in judgments

R v Dossi (1918) 87 LJKB 1024, 13 Cr App Rep 158, 14 Digest (Repl) 246, 2114.

Cases and authorities also cited

Atterton v Browne [1945] 1 KB 122.

Exeter Corpn v Heaman (1877) 42 JP 503.

Hunter v Coombs [1962] 1 All ER 904, [1962] 1 WLR 573.

Meek v Powell [1952] 1 All ER 347, [1952] 1 KB 164.

Ralph v Hurrell [1875] 40 JP 119.

32 Halsbury’s Statutes (2nd Edn) 501.

Stone’s Justices’ Manual (1969 Edn) Vol 1, pp 109, 110.

Case stated

This was a case stated by the deputy recorder (Peter Lewis Esq) on behalf of the court of quarter sessions for the county borough of Northampton in respect of the hearing of an appeal from the justices of the county borough on 8 July 1968.

On 29 January 1968 an information was preferred by the respondent, Thomas Fisher MacMillan Nicholson against the appellant, Kevin Gordon Wright, charging that the appellant had on 17 August 1967 incited a child to commit an act of gross indecency contrary to s 1 of the Indecency with Children Act 1960 and on 28 March 1968 the justices convicted the appellant of the offence (ordering on 9 May 1968 that the appellant should be conditionally discharged for 12 months). On 16 May 1968 the appellant appealed against his conviction to quarter sessions on the grounds that his ‘… conviction was against the weight of the evidence … ’

On the appeal the following facts were found. An offence of inciting a child to

Page 13 of [1970] 1 All ER 12

commit an act of gross indecency contrary to s 1 of the Indecency with Children Act 1960 had been committed; the offence had been committed by a male adult at 12.50 pm on a day in August 1967 in a spinney near Tiverton Avenue, Whitehills in the county borough. The male adult who committed the offence had had an Alsatian dog with him at the time. The appellant, who at the time of the offence lived about half a mile from the spinney and himself owned an Alsatian dog, had taken his Alsatian dog for walks through the spinney on a couple of occasions at about the time of the alleged offence. On 25 November 1967 outside the dairy department of the Northampton Co-operative Society in Ransome Road in the county borough the child had, on Pc Bottrill taking him to the Ransome Road and on Pc Bottrill indicating the appellant to him, identified the appellant as the male adult. After the identification the appellant had walked towards the police constable and had exchanged greetings with him. The police constable had on a previous occasion questioned the appellant about other allegations of indecency and on 27 November 1967 had interviewed the appellant again and, after having cautioned him, had said to him ‘on Saturday morning a boy identified you as being a man who was indecent towards him at about 12.55 pm on 17 August’ to which the appellant had replied ‘Yes, I remember the incident’; The police constable then told the appellant that the facts would be reported to the chief constable and cautioned him. The appellant made no reply. On 28 March 1968 at the trial before the justices the child in the course of giving his evidence with some difficulty again identified the appellant who was sitting in the court beside a number of other people, as the male adult. It was not disputed by the appellant that the offence had been committed by a male adult against the child on a day in the month of August 1967 but it was denied that the offence had been committed by the appellant.

It was contended on behalf of the appellant that: the child did not have sufficient opportunity of seeing the male adult to be able to recognise him again. By reason of the circumstances of the alleged identification on 25 November and by reason of the circumstances of the alleged identification on 28 March before the justices there had been no or no proper identification by the child of the appellant. As the respondent had failed to prove the offence had taken place on 17 August 1967 the finding by the justices that the appellant had committed the offence on 17 August could not be upheld. Further, the conviction should only be upheld on the respondent putting before the court evidence which corroborated the evidence of the child. The alleged conversation between the appellant and the police constable was not capable of being corroboration of the evidence of the child. In the premises the appeal should be allowed.

It was contended on behalf of the respondent that: corroboration of the evidence of the child, although desirable was not obligatory; the conversation was capable of being corroboration; alternatively, the facts before the court, corroboration could be dispensed with; the appellant was guilty of the offence; in the premises the appeal should be dismissed.

The deputy recorder dismissed the appeal. The appellant appealed to the Queen’s Bench Division.

D D Hacking for the appellant.

A R H Urquhart for the respondent.

22 October 1969. The following judgments were delivered.

LORD PARKER CJ. having stated the facts set out at p 12 h, ante, to h above, continued: the deputy recorder, as I think quite properly, directed himself that although it was possible for him to act on the child’s evidence without any corroboration, it was highly dangerous to do so, and that in this case he found it impossible to do so without corroboration. He then went on, however, to say that the conversation that the police constable had had with the appellant was capable of amounting to corroboration, and he held that it did amount to corroboration. So far as the evidence which

Page 14 of [1970] 1 All ER 12

came from the appellant that he owned an Alsatian dog and had taken that dog on a couple of occasions about the time of the offence through the spinney, the deputy recorder did not treat that as even capable of amounting to corroboration. In my judgment both the conversation and the evidence with regard to the dog were capable of amounting to corroboration. Accordingly, if the matter rested there I would have no hesitation in dismissing this appeal. But it does not end there because this was a case in which the information laid a specific day; it did not state: at some date unknown between 1 and 31 August, but stated: ‘On 17 August’ and that was the child’s evidence before the justices. When the matter was dealt with by way of rehearing at quarter sessions, as so often happens the child had forgotten all about it. Counsel did not think it right to lead, and accordingly the only evidence that he could give in regard to the date was ‘in August’. The information remained laid as 17 August and the appellant proceeded to call witnesses who if believed afforded him a complete alibi for that date, 17 August, and he took no steps in regard to any other days in August. That being the position, the deputy recorder found that the respondent had failed to prove that the incident took place on 17 August, but he was quite satisfied that it had occurred in August and that he felt that he was in a position to uphold the conviction and dismiss the appeal.

It is a little more than a technical point, being a point which can be, and it is said is in the present case, of some importance to the appellant. One starts with this, that s 100(1) of the Magistrates’ Courts Act 1952 provides:

‘No objection shall be allowed to any information or complaint, or to any summons or warrant to procure the presence of the defendant, for any defect in it in substance or in form, or for any variance between it and the evidence adduced on behalf of the prosecutor or complainant at the hearing of the information or complaint.’

It of course has always been held that those words cannot be read literally as meaning: there can be no attack on an information however fundamental the defect. It depends in every case whether, for instance, the variance between it and the evidence is such as to require an amendment. Circumstances vary infinitely, and it may well be that in many cases a variance between the evidence and the information will not require even an amendment; a misdescription of premises might not even require an amendment. But, as it seems to me in this case, unless the information is amended there might be grave injustice to the appellant, an amendment is called for. Once an amendment is called for and granted, then s 100(2) operates, which requires the court on the application of the defendant to adjourn.

I find it unnecessary to go through the cases to which this court has been referred. I am quite satisfied that this was a case where the deputy recorder having arrived at that stage, ought to have invited the prosecution to amend and I have no doubt that if there had been an amendment, laying the incident on a date unknown between 1 and 31 August, immediately an application would have been made on behalf of the appellant to adjourn in order that he could seek to establish an alibi for the whole of August, which we are told he might have done by reference to work records. In my judgment there is nothing this court can do except to allow this appeal. It will be no good today remitting the case to the deputy recorder to allow an amendment, because that would mean re-opening the whole case and the appellant being allowed to give further evidence. As it seems to me, the only course is to allow the appeal and quash the conviction. I should have added that although I said that I found it unnecessary to refer to the cases to which we have been referred, I do think that I ought to mention R v Dossi. That case dealt with an amendment of a date, and the facts were not unlike this case, although the amendment related to an indictment. It was there held that in fact it was possible to amend the date even at

Page 15 of [1970] 1 All ER 12

the time the jury were returning a verdict. A child there alleged an indecent assault on a specific date, 19 March 1918, and that was the date in the indictment. It appears the defence there was an alibi, as in the present case, for that date, 19 March. When the jury came to return their verdict they said ‘Not guilty to the 19 March’, in other words they thought that the alibi might be true, but they asked if they could return a verdict of guilty of other indecent assaults in March. It was in connection with that that the court held that an amendment could even at that stage be made. It is an interesting case, if only because it is very near the present case, and in argument it was urged that the amendment ought not to be allowed at that stage because the appellant would have been left without the opportunity of adducing alibis in regard to the rest of March. However, as I said earlier, every case depends on its own facts, and when one looks closely at R v Dossi one sees at once that the argument that was raised, that there was prejudice in that the appellant had been deprived of the opportunity of adducing alibis for March, was really very thin, if not false, because the appellant gave evidence and admitted on a number of occasions fondling girls. The only day that he said that he did not fondle any of them was on 19 March. Accordingly there is little he could have said, the only question being whether that fondling did amount in the circumstances to indecency. I would allow the appeal and quash the conviction.

ASHWORTH J. I agree.

CANTLEY J. I agree.

Appeal allowed. Conviction quashed

Solicitors: Jaques & Co agents for Frank Jones & Harley, Northampton (for the appellant); County Prosecuting Solicitor, Northampton (for the respondent).

N P Metcalfe Esq   Barrister.

Practice Direction

(Court of Protection: Mental health: Patients property)

[1970] 1 All ER 15

PRACTICE DIRECTIONS

COURT OF PROTECTION

Mental health – Patient’s property – Settlement – Application to court for order, etc – Parties to application – Evidence – Mental Health Act 1959, s 103(1) (d) – Court of Protection Rules 1960 (SI 1960 No 1146), r 21.

Mental health – Patient’s property – Gift – Application to court for order, etc – Parties to application – Evidence – Mental Health Act 1959, s 103(1) (d) – Court of Protection Rules 1960 (SI 1960 No 1146), r 21.

Mental health – Patient’s property – Will – Application to court for order, etc – Parties to application – Relevant evidence – Evidence of lack of testamentary disposition – Evidence of domicil and situation of immovable property affected by proposed will – Mental Health Act 1959, ss 103(1) (dd), (3) and 103A (4) – Administration of Justice Act 1969, ss 17 and 18. Mental health – Patient’s property – Will – Execution and attestation – Mental Health Act 1959, s 103A, as added by Administration of Justice Act 1969, s 18.

Mental health – Patient’s property – Will – Drafting – Reasons for disposing of patient’s property in manner intended – Mental Health Act 1959, s 103A (5), as added by Administration of Justice Act 1969, s 18.

Page 16 of [1970] 1 All ER 15

Mental health – Patient’s property – Will – Sealing – Mental Health Act 1959, s 103A (1), as added by the Administration of Justice Act 1969, s 18.

This note refers to applications for settlements and capital gifts under s 103(1)(d)a of the Mental Health Act 1959 (‘the principal Act’) and for the execution of wills under para (dd) of the same subsection, added by s 17 of the Administration of Justice Act 1969 (‘the Act of 1969’). The note is intended for the general guidance of solicitors as to the practice of the court.

These applications will, with few exceptions, be adjourned to one of the nominated judges when the master is satisfied that the proper parties are before the court and that the evidence is in order.

1. SETTLEMENTS AND GIFTS

Parties

Under r 21b of the Court of Protection Rules 1960, the application should be made by one or more of the persons who seek to benefit from the proposed settlement or gift. The receiver, if not the applicant or one of the applicants, should be joined as respondent. Otherwise, no person should be made a respondent until the master has so directed.

If the receiver is personally interested in the relief sought, or if there is other reason for having the interests of the patient separately represented, the master will probably direct the patient to be added as a respondent and that he be represented by the Official Solicitor.

The principles which guide the court in deciding who should be added as parties to an application are that, in general, all persons whose interests will be materially affected by the proposals should be parties, but the discretion is a wide one and will be exercised according to the particular facts of each case.

Evidence

The only evidence before the judge will be the evidence filed or referred to on the summons. Accordingly this evidence should give all relevant evidence necessary for the disposal of the application; full particulars as to the age, family, fortune, needs and general circumstances of the patient and the general background of his affairs in addition to the facts directly relating to the application.

2. EXECUTION OF WILLS

In general the same procedure, mutatis mutandis, will be followed as in applications for settlements and gifts. Although r 21 above referred to does not in terms apply to applications for the execution of wills, the same principles as to parties and evidence will be followed. The new jurisdiction came into effect on 1 December 1969 (SI 1969 No 1607c).

Attention is called to the following matters:

(a) A direction added to s 103(3) of the principal Act by s 17(2) of the Act of 1969 requires that the judge must have reason to believe that the patient is incapable of making a valid will for himself. It can be assumed that in many cases the court will require a report from one of the Lord Chancellor’s visitors as to this. Medical evidence already filed should be referred to but new evidence as to lack of testamentary capacity should not be adduced except under the directions of the master.

(b) Section 103A of the principal Act (added by s 18 of the Act of 1969) provides that s 9 of the Wills Act 1837, which relates to the execution and attestation of wills, shall not apply. The same s 103A directs how a ‘statutory’ will is to be executed and attested, and solicitors should consider and submit a suitable form of attestation clause.

Page 17 of [1970] 1 All ER 15

(c) Having regard to s 103A (4) of the principal Act the evidence on the summons should state the patient’s domicile, whether any immovable property will be affected by the proposed will, and if so, the situation of that property if already belonging to the patient.

(d) Having regard to s 103A (5) of the principal Act referring to s 1(7) of the Inheritance (Family Provisions) Act 1938, it should be considered whether any reasons for disposing of the patient’s property in the way intended should be stated in the will.

(e) ‘Statutory’ wills will not be sealed by the court until they have been executed and attested in accordance with the provisions of s 103A (1) of the principal Act.

R E Ball,   Chief Master

Practice Direction

(Chancery Division: Patent Actions)

[1970] 1 All ER 17

PRACTICE DIRECTIONS

CHANCERY DIVISION (PATENT ACTIONS)

10 DECEMBER 1969

Patent – Practice and procedure – Summons suitable for hearing by judge – Issue of summons – Stamp – Adjournment into court – Setting down for hearing.

It is important that the time occupied by interlocutory proceedings in patent actions should be kept to a minimum. The judges assigned to the hearing of such actions have reviewed the additional steps which can be taken to that end and consider that where a summons raises questions which involve the use of their specialised knowledge and is likely in any event to be adjourned into court there is no need for a preliminary hearing by a master.

Accordingly, where the parties agree that such is the case, the following procedure may be followed:

1. The party concerned will issue the summons in the master’s chambers in the usual way but no date for hearing will be inserted.

2. The summons will be stamped with the appropriate issuing fee and the fee payable on adjournment into court before it is presented to the summons clerk. It will be accompanied by: (a) two copies of the summons, one for the judge and one for chambers; (b) two complete sets of the pleadings served up to the date of issue of the summons; (c) any affidavits intended to be used in support of the summons or in answer or reply; and (d) a certificate, signed by the solicitors for all parties, to the effect that the parties have agreed that the summons is suitable for hearing by a judge in the first place.

3. The master will forthwith adjourn the matter into court as a procedure summons by signing the appropriate adjournment note prepared by his clerk.

4. The summons will thereupon be set down for hearing without any further action by the parties.

This procedure will not be followed in the case of the summons for directions under RSC Ord 103, r 26, even if the master will be bound to adjourn it into court, because such a summons is returnable in not less than 21 days, the parties need time to agree the usual minutes of order and the master must at that stage check the regularity of the proceedings.

By direction of Graham J.

R E Ball,   Chief Master

Des Salles d’Epinoix v Royal Borough of Kensington and Chelsea

[1970] 1 All ER 18

Categories:        LOCAL GOVERNMENT        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD PARKER CJ, ASHWORTH AND CANTLEY JJ        

Hearing Date(s):        29 OCTOBER 1969        

Rates – Rateable occupation – Liability for rates – Person named in valuation list – Onus of showing not in rateable occupation – Husband separated from wife – Wife continuing to occupy former matrimonial home – General Rate Act 1967, s 97(1).

The appellant was married in 1946 and from that date was listed on the rating authority’s valuation list as the rateable occupier of the matrimonial home and (prior to the year commencing 1 April 1967) had always paid the rates levied on the premises although the premises were occupied by his wife and himself as joint tenants. On 9 November 1966, owing to matrimonial difficulties, he left the matrimonial home and had not been in occupation since although, despite the appellant’s efforts to make her move, his wife and child continued to live there. The appellant took no steps to have his name removed from the valuation list but refused to pay the demand for the year 1967–68. As a result a summons was issued alleging contravention of s 97(1)aof the General Rate Act 1967. The appellant did not appear to defend, so that the justice, on proof of the service of the summons, proceeded to issue a distress warrant. On appeal from quarter sessions who had dismissed his appeal,

Held – S 97(1) placed an onus on the person named in the valuation list to show reason why he had not paid (eg because he had ceased to be the rateable occupier); the appellant had not discharged this burden and accordingly the appeal would be dismissed (see p 21 g to j, post).

Per Curiam: a man may remain in rateable occupation through deriving a beneficial use from the premises if, quite apart from any arrangement he makes, the result is that his obligations to maintain are discharged pro tanto (see p 20 j to p 21 a, h and j, post).

Cardiff Corpn v Robinson [1956] 3 All ER 56 and Malden and Coombe Corpn v Bennett [1963] 2 All ER 527 distinguished.

Notes

For meaning of rateable occupation, see 32 Halsbury’s Laws (3rd Edn) 16, para 16, and for cases on the subject, see 38 Digest (Repl) 478, 479, 20–29.

For rateable occupation by a spouse, see 32 Halsbury’s Laws (3rd Edn) 20, 21, para 23, and for cases on the subject, see 38 Digest (Repl) 482, 52, 509, 216–219.

For the General Rate Act 1967, s 97, see 47 Halsbury’s Statutes (2nd Edn) 1332.

Cases referred to in judgment

Cardiff Corpn v Robinson [1956] 3 All ER 56, [1957] 1 QB 39, [1956] 3 WLR 522, 120 JP 500, 38 Digest (Repl) 482, 52.

Des Salles d’Epinoix v Des Salles d’Epinoix [1967] 2 All ER 539, [1967] 1 WLR 553, Digest (Repl) Supp.

Malden and Coombe Corpn v Bennett [1963] 2 All ER 527, [1963] 1 WLR 652, 127 JP 411, Digest (Cont Vol A) 1278, 52a.

Cases and authorities also cited

Robinson v Taylor [1948] 1 All ER 291, [1948] 1 KB 562.

38 Halsbury’s Laws (3rd Edn) 16.

47 Halsbury’s Statutes (2nd Edn) 1223, 1224, 1332.

Page 19 of [1970] 1 All ER 18

Case stated

This was a case stated by the deputy-chairman (O S Macleay Esq) and justices of the Inner London Sessions sitting at the Sessions House, Newington Causeway in the London Borough of Southwark, in respect of their adjudication on an appeal from the Kensington Magistrates’ Court.

On 9 July 1968, a complaint was preferred by the Royal Borough of Kensington and Chelsea (‘the rating authority’), against the appellant, Gaston des Salles d’Epinoix, pursuant to the General Rate Act 1967 that he being a person duly rated and assessed in a rate made on 19 March 1968 for property situate and known as first and second floor maisonette and garden, no 39 Lansdowne Road, London W11 (‘the premises’), had not paid the amount of rate totalling £184. The complaint was heard on 25 September 1968 by the justices of the West London Petty Sessional Division, sitting at the magistrates’ court, Town Hall, Kensington, London W8, who made an order that the appellant was liable for the rate levied on the premises. From that decision the appellant appealed to the Inner London Quarter Sessions by notice dated 8 October 1968 on the following grounds—that the magistrates’ court was wrong in law in holding that the appellant was liable for the rate.

The following facts were found. The appellant was married on 26 October 1946 and from that date he and his wife cohabited and occupied the premises. They held the premises jointly under the terms of a written lease which expired by effluxion of time on 29 September 1968. On 9 November 1966, by reason of matrimonial difficulties the appellant left his wife. After that date the appellant’s wife and child—then aged 18—continued to occupy and reside in the premises. On 18 January 1967 in the Court of Appeal the appellant gave an undertaking (through counsel) not to return to the premises pending the hearing of divorce proceedings brought by the appellant’s wife on the grounds of the appellant’s cruelty and desertion. On 3 April 1968, Mr Registrar Newton made an order of alimony pending suit in favour of the appellant’s wife in the sum of £850 per annum less tax. On 22 October 1968, the appellant’s wife was granted a decree nisi of divorce. The appellant had made efforts to get his wife to move from the premises. The appellant was shown in the rate list as the rateable occupier of the premises. The appellant had always paid the rates levied on the premises. The appellant did not defend the general rate demand for the year 1 April 1967 to 31 March 1968 and a distress warrant for these rates was obtained by the rating authority against the appellant. The general rate for the year 1 April 1968 to 31 March 1969 levied by the rating authority on the premises was £183 10s plus 10s costs on the summons. The appellant had not paid the sum of £184 nor any sum.

It was contended on behalf of the appellant that he had never at any time agreed that his wife should continue in occupation of the premises after he had left in order that thereby he might discharge any liability he might have towards her and that her refusal to move from the premises to premises more suitable and less expensive could not and should not render him liable for the rates.

It was contended on behalf of the rating authority: that it was not incumbent on the rating authority to enquire into the precise matrimonial problems of the appellant. That any maintenance order made in favour of the appellant’s wife did not decide who was liable to pay the rate to the rating authority. That the appellant’s wife and child occupied the premises and that the appellant was thereby discharging in some part his obligation to maintain her. That the appellant was deriving a beneficial use from the premises and was accordingly in rateable occupation. That it was not possible for the appellant and his wife to be jointly in rateable occupation of the premises. That no court had made any order under s 1 of the Matrimonial Homes Act 1967 transferring the obligation to pay the rates onto the appellant’s wife.

Quarter Sessions ruled that the appellant was in rateable occupation of the premises and dismissed the appeal with costs.

The appellant now appealed.

Page 20 of [1970] 1 All ER 18

R D B Davies for the appellant.

R A W Sears for the rating authority.

29 October 1969. The following judgments were delivered.

LORD PARKER CJ. This is an appeal by way of case stated from a decision of the appeals committee of Inner London Sessions who dismissed an appeal from a decision of justices for the West London Petty Sessional Division sitting at Kensington who made an order that the appellant was liable for rates for the year 1968–69 in respect of a maisonette and garden at no 39 Landsowne Road, London W11.

The matter arises in this way. The appellant was married as long ago as 1946, and from that date until 9 November 1966 he lived there with his wife. The appellant and his wife were joint tenants of these premises. There is no doubt however that throughout that period he was the rateable occupier and as such paid rates. On 9 November 1966, by reason of matrimonial difficulties he left his wife, and from then on right up till today the wife and a child who was then about 18 and now is 21, have continued to occupy and reside on the premises. In addition he did not pay the demand made for the year April 1967–68, and as a result of a complaint was made and a summons issued. He did not appear to defend, and the justices, as they were entitled to do on proof of service of the summons on him, proceeded in his absence to issue a distress warrant.

Pausing there, it was urged before the appeals committee that this was a case in which, although the appellant had given up physical occupation of the premises, he continued to derive beneficial use from them by housing his family, particularly his wife, and thus discharged in some part his obligation towards her. It was that submission which as I see it on the case stated found favour with first of all the justices and then the appeals committee, who found that the appellant was throughout in rateable occupation. That submission was based on the principle laid down in two cases, Cardiff Corpn v Robinson and Malden and Coombe Corpn v Bennett, the principle in those cases being that where a wife is allowed to remain in the matrimonial home, the husband is thereby discharging in part his obligation to maintain her, and by reason of that is deriving a beneficial use in the house and therefore continuing in rateable occupation.

Counsel for the appellant in his argument very rightly draws attention to the fact that his case on the facts is quite different to the Cardiff case and the Malden and Coombe case. In both those cases the wife remained on in the matrimonial home by agreement with the husband, in other words he allowed her to remain there on certain conditions, and was thereby discharging in part his obligation towards her. Counsel says that when you look at the facts in this case, the position is quite different.

May I say at once that the facts as set out in the case stated are meagre, but it so happens that the dispute between the appellant and his wife in this case did reach the Court of Appealb. The effect of the facts as they appeared in that case and the meagre facts set out in the case stated really amount to this, that this is not a case of allowing the wife to stay in the matrimonial home; the appellant has been doing his level best to get her to go. She has not gone, and indeed she is a joint tenant of the premises. Further, she has prevented him from taking his furniture out of the house, she has changed the locks, thus preventing him from getting into the house, and indeed in the course of the litigtion between the parties an undertaking was given to counsel that the appellant would not return to the premises. In addition he has made efforts, so it is said, to get her to move,b ut she refuses to do so.

In my judgment this is a different case on its facts to the cases to which I have already referred. But nevertheless as it seems to me a man may remain in rateable occupation

Page 21 of [1970] 1 All ER 18

through deriving a beneficial use from the premises if, quite apart from any arrangement he makes, the result is that his obligations to maintain are discharged pro tanto. We do not know what the financial arrangements were. We are told in the case stated that an order for alimony pending suit was made in favour of the appellant’s wife in the sum of £850 less tax. What matters were taken into consideration are not clear, and anyhow counsel for the rating authority would point to the fact, which I think is right, that any arrangement made between the appellant and his wife, or resulting from an order made by the registrar, is in no way binding on the rating authority. Be that as it may, it seems to me that rating authorities are faced in the future with this very common case of husband and wife splitting up and eventually having to decide, or get the court to decide, whether physical occupation having ceased, a beneficial occupation remains.

Here one starts with this, that ever since 1946 the appellant has been on the valuation list as the rateable occupier. No steps have been taken by him since 9 November 1966 when he left the matrimonial home, to have his name removed from the valuation list. In addition, as I have said, when served with a summons for a distress warrant in respect of the 1967–68 rates, he never appeared to defend. In those circumstances it seems to me that a rating authority who can know nothing of the exact circumstances as between the appellant and his wife have really no choice open to them but to proceed against the appellant, who throughout, as far as they know, has remained the rateable occupier. It seems to me that then there must be a shifting of the burden of proof on general principles, because the only party to the proceedings who can know what the exact position is, is the appellant, and it seems to me that the burden then is on him to show that he has in fact ceased to be the rateable occupier. Not only do I think that that is true on general principles, but when one looks at s 97(1) of the General Rate Act 1967 it would suggest that there is this shifting of burden, because that subsection provides:

1The proceedings for the issue of a warrant of distress under this Part of this Act may be instituted by making complaint before a justice of the peace and applying for a summons requiring the person named in the complaint to appear before a magistrates’ court to show why he has not paid the rate specified in the complaint.’

That as I read it contemplates that assuming that there is prima facie evidence that he is the rateable occupier, as there clearly was in this case, it is fr him then to appear and show for one reason or another why he has not paid. One reason which he could put forward is that he had ceased to be the rateable occupier. Looked at in that way, it seems to me that it is quite clear that the appellant has not discharged that burden on him, and on the ground, and on that ground alone I would dismiss this appeal.

ASHWORTH J. I agree. I will only say this, that I confess to some slight misgiving on this ground, that if the full facts had been explored and were presented in this case, it may be that the appellant might have succeeded in showing that in regard to the period the subject of this present complaint, he was not in a rateable occupation, but I am quite satisfied, as Lord Parker CJ has said, that there was nothing before Inner London Quarter Sessions which would justify them in reaching that conclusion. I agree with the result.

CANTLEY J. I agree and there is nothing which I would wish to add.

Appeal dismissed.

Solicitors: Hillearys (for the appellant); G S Pearson (for the rating authority).

N P Metcalfe Esq   Barrister.

Trent River Authority v F H Drabble & Sons Ltd

[1970] 1 All ER 22

Categories:        ENVIRONMENTAL        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD PARKER CJ, ASHWORTH AND CANTLEY JJ        

Hearing Date(s):        21 OCTOBER 1969        

Water and watercourses – Pollution of river – Discharge of trade effluent – Conditions imposed by river authority – Application for consent granted subject to conditions – Less stringent conditions for initial period – Whether variation of conditions to consent possible – Rivers (Prevention of Pollution) Act 1961, ss 1(4), 5(2), Sch 1.

The respondents were bleachers, dyers and finishers. They discharged trade effluent into a brook which ran into a tributary of the river Trent which came within the area of the appellant, the Trent River Authority. On 8 September 1962, the respondents, in accordance with the provisions of the Rivers (Prevention of Pullution) Act 1961, applied to the appellant’s predecessor, the Trent River Board, for consent to the continuation of a discharge of trade effluent. With the application the respondents gave details of the proposed quality and quantity of the effluent. On 13 October 1966, the river board granted its consent subject to conditions as to quality and quantity ‘As from the 1 April, 1968’. Until that date it consented to the continued discharge of effluent provided that it was of the same quality and quantity as that proposed in the application of 8 September 1962. The consent also provided, in accordance with s 5(2)a of and Sch 1b to the 1961 Act, that its terms would not be altered before the expiration of two years from 13 October 1966 without the written consent of the respondents. On 30 September 1968, informations were preferred against the respondents alleging that they unlawfully caused or knowingly permitted trade effluent to enter the brook which did not comply with the conditions which came into force on 1 April 1968. Before the justices a submission of no case was made on behalf of the respondents on the ground that the document of 13 October 1966 was either wholly invalid as a consent (in which case the conditions were invalid) or that the conditions which applied as from 1 April 1968 were invalid as there were in effect two consents in the document, one governing the period up to the end of March 1968 and the other governing the consent thereafter. The justices upheld the submission of no case to answer and dismissed the informations. On the question whether (it being agreed that there was in fact only one consent) that consent could have conditions which varied from time to time,

Held – Stringent conditions were laid down to come into force at a future date, in this case 1 April 1968, as envisaged by s 1(4)c of the 1961 Act, but for a period they were deemed to be complied with by a lesser performance of the conditions to enable persons in the position of the respondents to change their system of work; accordingly there was only one set of conditions and these were not varied within a period of two years so the provisions of s 5(2) of and Sch 1 to the Act were not infringed (see p 28 f, to p 29 a, post).

Notes

For conditions of consent by river boards in relation to prevention of pollution of rivers, see 39 Halsbury’s Laws (3rd Edn) 751, 752, para 1097.

For the Rivers (Prevention of Pollution) Act 1961, ss 1, 5, Sch 1, see 41 Halsbury’s Statutes (2nd Edn) 1104, 1109, 1117.

Page 23 of [1970] 1 All ER 22

Case stated

This was a case stated by the justices for the county of Derby acting in and for the petty sessional division of Matlock, in respect of their adjudications as a magistrates’ court sitting at Matlock on 2 January 1969.

On 30 September 1968, informations were preferred by the appellant, the Trent River Authority (by Ian Ruxton Drummond, its clerk), against the respondents, F H Drabble & Sons Ltd, charging that the respondents on 2, 8, 19 and 25 April 1968 unlawfully caused to enter a stream called the Bentley Brook by an outlet in relation to which conditions had been imposed and were in force under s 1 of the Rivers (Prevention of Pollution) Act 1961, a trade effluent which did not comply with the conditions, contrary to s 1(8) of the Act; and on the same dates unlawfully knowingly permitted to enter the stream by an outlet in relation to which conditions had been imposed and were in force under s 1 of the Act a trade effluent which did not comply with the conditions, contrary to s 1(8) of the Act.

The following facts were found. The respondents carried on business as bleachers, dyers and finishers at Tansley Wood Mills, Matlock in the county of Derby, and trade wastes from the respondents’ premises discharged into the Bentley Brook, a stream which entered into the River Derwent at Matlock. The appellant was under the Water Resources Act 1963 an authority charged with the enforcement of the provisions of the Rivers (Prevention of Pollution) Acts 1951 and 1961, and the Bentley Brook and the River Derwent were within its area. On 8 September 1962, the respondents applied to the Trent River Board, to the powers and duties of which the appellant had succeeded, in accordance with s 1 of the 1961 Act, for consent to the continuation of a discharge of trade/sewage effluent from their Tyansley Wood Mills into the Bentley Brook. The respondents proposed that the effluent should have, inter alia, the following characteristics: a permanganate value of 28 milligrammes per litre; a biochemical oxygen demand figure of 40–60 milligrammes per litre; and a suspended solid figure of 30–40 milligrammes per litre. On 13 October 1966 the appellant gave consent to the discharge subject to the following conditions:

‘As from the 1st April, 1968. 1. The effluent discharged to the stream shall not: (a) have a permanganate value (4 hours) in excess of 20 milligrams per litre; (b) have a Biochemical Oxygen Demand (5 days) in excess of 20 milligrams per litre; (c) contain Suspended Solids in excess of 30 milligrams per litre; (d) have a pH value less than 5 nor greater than 9; (i) contain arsenic, cadmium, chromium, copper, lead, nickel or zinc either individually or in total in excess of 1 milligram per litre; (ii) contain free chlorine in excess of 1 milligram per litre; (iii) contain uncomplexed cyanide (CN) in excess of 0·1 milligram per litre; (f) contain non-volatile matter extractable by light petroleum in excess of 5 milligrams per litre;

‘2. The effluent discharged to the stream shall not have a temperature in excess of 25°C;

‘3. The volume of effluent discharged to the stream shall not exceed 280,000 gallons per day;

‘4. The rate of discharge of the effluent to the stream shall not exceed 335 gallons per minute.

‘Until the foregoing conditions become effective the [appellant] consents to the continued discharge of trade effluent provided that the quantity and quality of the effluent are as described in the application dated the 8th September, 1962.

‘NOTE The analytical tests used for the determination of the above named conditions shall be carried out in accordance with the Ministry of Housing and Local Government publication, “Methods of Chemical Analysis as applied to Sewage and Sewage Effluents” 1956 and “Recommended Methods for the Analysis of Trade Effluents” published for the Society of Analytical Chemistry by W. Heffer & Son Limited, 1958.

Page 24 of [1970] 1 All ER 22

‘The terms of this Consent will not, without the Consent in writing of the person to whom this Consent is given (or his successor) be altered before the expiration of the period ending with the thirteenth day of October, 1968.’

On 2, 8, 19 and 25 April 1968, Mr Hopkinson, a district inspector of the appellant went to the discharge point from the respondents’ premises into the Bentley Brook and there took a statutory sample of the trade effluent which was flowing from the respondents’ premises into the Bentley Brook. He then, in accordance with the provisions of s 113 of the Water Resources Act 1963 and in the presence of representatives of the respondents, divided his sample into three parts, one of which was handed to the representatives of the respondents and one of which was later delivered at the appellant’s laboratory to Mr Thomas William Raven, a senior scientific officer of the appellant. This sample was analysed by Mr Raven. The effluent on 2 April had a permanganate value of 124 milligrammes per litre, a biochemical oxygen demand of 150 milligrammes per litre, and a suspended solids figure of 83 milligrammes per litre. On 8 April, the effluent had a biochemical oxygen demand figure of 150 milligrammes per litre and a free chlorine figure of 8·4 milligrammes per litre. On 19 April, the effluent had a biochemical oxygen demand figure of 47·0 milligrammesper litre and a pH value of 10. On 25 April, the effluent had a permanganate value of 30·3 milligrammes per litre and a biochemical oxygen demand figure of 82·0 milligrammes per litre. The effluent on each of those dates was of a polluting nature and did not comply with the conditions set out in the consent of 13 October 1966 and therein expressed to be in force ‘as from the 1 April, 1968’. On 29 May 1968, the river pollution committee of the appellant authorised the service of a notice on the respondents that proceedings were being considered in respect of the offences of 2, 8, 19 and 25 April 1968. A notice in accordance with s 11 of the 1961 Act was sent by recorded delivery to the secretary of the respondents on 28 June 1968. The receipt of this notice was acknowledged by the respondents on 5 August 1968. On 23 August 1968, the chairman and vice-chairman of the appellant authorised the institution of these proceedings against the respondents.

On behalf of the respondents it was contended that: the effect of s 5(2) of and Sch 1 to the Act and of the statement included amongst the terms of the consent dated 13 October 1966 in compliance with those provisions, was that the terms of the consent could not be altered before the expiration of the period ending on 13 October 1968 without the written consent of the respondents; the consent purported to be subject to two consecutive sets of conditions. Of these, the conditions which required that the quantity and quality of the respondents’ trade effluent should be as described in the application dated 8 September 1962 were expressed to have effect from the date of the consent until 1 April 1968 while the second set of conditions, namely the conditions set out in detail in the consent, were expressed to take effect from 1 April 1968; the effect of the two sets of conditions was to purport to alter the terms of the consent from 1 April 1968 by imposing from that date the second set of conditions; in the circumstances either the whole consent was invalid (in which case the appellant had failed to issue any valid consent) or the conditions purporting to come into effect on 1 April 1968 were invalid and of no effect; in the circumstances the respondents were not guilty of any offence.

On the part of the appellant in reply it was contended that: by s 1(4) the appellant had power to impose conditions both to take effect until 31 March 1968 and to become effective on 1 April 1968. It had the power to impose both sets of conditions in one document. There was no restriction which prevented a consent having more than one condition relating to each of the matters specified; s 5(3) stated that no notice under s 5(1) should be given without the consent in writing of the person to whom it was given before the end of the period specified in the consent and required by Sch 1. But s 5(1) was concerned with the review and the variation of conditions at some time after the original consent was issued. It had no application to the conditions set out in the consent at the time the consent was issued. If the respondents objected then

Page 25 of [1970] 1 All ER 22

to the conditions, and to the fact that there were two sets, the respondents’ remedy was to appeal to the Minister under s 6(1)(b) and assert that they were unreasonable. The purpose of s 5(3) was to prevent a party being taken by surprise, or conditions being charged in an arbitrary way to that the rights of the discharger were affected without his having adequate prior warning. It was not to ensure that the position for a specified period was constant. The original consent was not a notice under s 5(1). Section 5(1) and (3) were irrelevant to the situation before the court.

The justices accepted a submission made by counsel on behalf of the respondents that there was no case to answer and dismissed the informations. The appellant appealed.

George Newsom QC and P G Hughes for the appellant.

I D L Glidewell QC and D M W Barnes for the respondents.

21 October 1969. The following judgments were delivered.

LORD PARKER CJ. This is an appeal by way of case stated from a decision of justices for the county of Derby sitting at Matlock, who on a submission of no case dismissed some eight informations preferred by the Trent River Authority, the appellant, against the respondents for, to put it quite generally, breaches of conditions imposed under s 1(4) of the Rivers (Prevention of Pollution) Act 1961. In order to understand the history, it is necessary to look quite shortly at the relevant provisions of the legislation. For my part, I find it unnecessary to go back further than the Rivers (Prevention of Pollution) Act 1961. Prior to that, under what is called the principal 1951 Actd, the board’s consent was necessary to the discharge of effluent through what were called new outlets. The object, amongst others, of the 1961 Act was to control also old outlets. Section 1(1) of the 1961 Act provides:

‘Subject to this Act, it shall be unlawful on and after the date appointed under this section [that was 1st July 1963] to make a discharge of trade or sewage effluent to a stream, being a discharge which is not controlled under section seven of the principal Act, without the consent under this Act of the river board, which consent shall not be unreasonably withheld.’

By sub-s (3), provision is made as to the application which has to be made to the river board for their consent, and by sub-s (4) it is provided:

‘On an application or consent under subsection (1) of this section the river board may grant their consent subject to such conditions as they may reasonably impose, being conditions—(a) as to the nature and composition, temperature, volume or rate of discharge of effluent from the land or premises to which the application relates … and any such conditions may be framed so as to have effect for a specified period, or for a period beginning or ending with a specified date.’

Finally, by s 1(8) it provided:

(No person shall cause or knowingly permit to enter a stream from land or premises in relation to which conditions have been imposed under this Act and are for the time being in force a trade or sewage effluent not complying with those conditions, and any person who does so shall be guilty of an offence punishable under section two of the principal Act.’

In passing may I say that these eight informations, which are in two pairs of four, allege in the one case knowingly permitting, in the other case, causing an effluent to be discharged which did not comply with conditions.

Section 2 deals with the period between the time when an application is put in and

Page 26 of [1970] 1 All ER 22

the application is dealt with. To take it quite shortly, by sub-s (1) it is provided that during that period—

‘… (a) it shall not be an offence under subsection (i) of section one of this Act to make a discharge from the land or premises to which the application relates which is of the nature and composition specified in the application, and which does not, as respects temperature, volume and rate of discharge, exceed the amounts or limits specified in the application … ’

Then by sub-s (2):

‘If an application to the river board for their consent under this Act is duly made before the date appointed under section one of this Act, then, until the application is disposed of, it shall not be an offence under, or a contravention of—[in particular] (a) paragraph (a) of subsection (1) of section two of the principal Act … ’

Section 5 deals with review and variation of conditions governing discharges and new outlets, and it provides:

‘(1) A river board shall from time to time review any condition having effect under this Act or under section seven of the principal Act (other than a condition to be satisfied before a discharge is made or an outlet is brought into use) and may give the person making the discharge or using the outlet, as the case may be, a notice making any reasonable variation of, or revoking, any such condition …

‘(2) A statement in the form in the First Schedule to this Act shall be included among the terms of—(a) any consent having effect under this Act … ’

and that statement sets out:

‘The terms of this [consent] … will not, without the consent in writing of the person to whom this [consent] … is given (or his successor), be altered before the expiration of the period ending with the [blank] day of [blank].’

To complete s 5(2), which provides for the terms of Sch 1 of this Act being included among the terms of the consent, it then goes on:

‘… being a consent taking effect, or a notice given, after the commencement of this Act, and the period specified in the statement shall be a reasonable period of not less than two years from the date on which the consent takes effect or the notice is given.

‘(3) No notice shall be given under subsection (1) of this section before the expiration of the period specified in the said statement except with the consent in writing of the person to whom the notice is given.’

What happened here was this. The respondents carry on business as bleachers, dyers and finishers at premises known as Tansley Wood Mills, Matlock. Trade wastes from those premises discharge into the Bentley Brook, a stream which enters into the River Derwent at Matlock and thence into the River Trent. The appellant is the authority charged with the enforcement of the provisions of the two Acts to which I have referred of 1951 and 1961, and Bentley Brook and the River Derwent lie within its area. Accordingly, on 8 September 1962 before the appointed day, the respondents applied to the river board in accordance with s 1 of the 1961 Act for consent to the continuation of a discharge of trade effluent into Bentley Brook, something which they had done for some time, it being an old outlet. The respondents in that application set out, as they were bound by s 1(3) of the Act of 1961 to do, the nature and composition of the effluent, the maximum temperature of the effluent, the maximum quantity of the effluent and the highest rate at which it was proposed to discharge the effluent. That, as I have said, was on 8 September 1962. For some reason unknown to me, and we have not been told, that application was not dealt

Page 27 of [1970] 1 All ER 22

with until 13 October 1966. Meanwhile the respondents were protected by s 2 of the 1961 Act. The manner in which the application was dealt with on 13 October 1966 was this. There is annexed to the case a document entitled ‘Notification of Consent’. That document is addressed to the respondents, and states:

‘THE TRENT RIVER BOARD in pursuance of the powers conferred on them by the above-mentioned Acts [those are the Acts of 1951 and 1961] HEREBY CONSENT to your continuing to make a discharge of effluent to a stream as described below, the subject of your application dated 8th September 1962.’

Thereafter it set out the description of the outlet and the general description of the effluent, being discharge of trade effluent from bleaching, dyeing and mercerising processes at the respondents’ Tansley Wood Mills. Then on a printed document headed ‘Conditions attached to Consent’ there appeared this, and I need not read them all ‘As from the 1 April, 1968. [in other words looking about 18 months ahead] 1. The effluent discharged to the stream shall not … ’ and then it sets out the maximum of certain ingredients which that effluent can contain. It sets out the temperature in excess of which it is not to be discharged; it sets out the volume in excess of which it is not to be discharged, and it sets out the rate above which it is not to be discharged. So far so good; those are conditions laid down in October 1966 to become effective on 1 April 1968 and of course fully comply with the provisions of s 1(4) which provides that any such conditions may be framed to take effect for a period beginning with a specified date, beginning here on 1 April 1968. But, and this is what has given rise to the trouble, the document goes on in this form:

‘Until the foregoing conditions become effective [that is until the 1 April 1968] the Authority consents to the continued discharge of trade effluent provided that the quantity and quality of the effluent are as described in the application dated the 8th September, 1962.’

Finally, there appear these words:

‘The terms of this Consent will not, without the Consent in writing of the person to whom this Consent is given (or his successor) be altered before the expiration of the period ending with the thirteenth day of October, 1968.’

In saying that the river board was at any rate purporting to comply with s 5(2) of the Act.

Evidence was called by the appellant before the justices that as a result of samples taken on four days, 2, 8, 19 and 25 April 1968, the respondents either unlawfully caused or unlawfully knowingly permitted their effluent to enter Bentley Brook in default of these conditions, those referring to the conditions to be enforced on 1 April 1968.

At the end of the prosecution case, a submission of no case was made, it being urged that the document of 13 October 1966 was either wholly invalid as a consent, in which case the conditions were invalid, or that the conditions which applied as from 1 April 1968 were invalid. In passing, it is to be observed that even if that were so, the respondents may well have been guilty of an offence under the principal Act, but that is not what they are charged with here. What was urged before the justices and found favour with them, was that although words in the singular in the ordinary way include the plural, yet when one looks at the whole of the 1961 Act it disclosed an intention otherwise, so that s 1(4) in referring to consent was referring to, and only referring to, one consent. It is urged that there were in effect two consents in the document of 13 October 1966; one consent governing the period up to the end of March 1968 and the consent for the future. Accordingly, the justices came to the conclusion that either the whole of the consent (and its conditions) was invalid, or at any rate the consent relative to the period after 1 April 1968 was invalid and accordingly they dismissed the two sets of four informations.

Page 28 of [1970] 1 All ER 22

Before this court counsel for the respondents has taken that point, but it is only I think fair to him to say that his main point before this court is rather different. As it seems to me, although the document of 13 October 1966 in words refers to a consent with conditions from 1 April 1968 and a consent up to 1 April 1968, it is in truth and in effect one consent. It is a consent on conditions, which conditions vary from period to period. Accordingly I find it unnecessary to consider whether there is in this legislation an intention contrary to the ordinary principle in the Interpretation Act 1889 of the singular including the plural. It seems to me there is but one consent.

The real question here is whether, it being agreed that there is but one consent, that consent can have conditions varying from time to time. I have read s 1(4); the words are wide, but at the same time counsel for the respondents is perfectly right in pointing out that wide as they are, they do appear to envisage that the conditions are to have effect either for a specified period or for a period beginning or ending with the specified date, or, I suppose, for an undefined period. Accordingly, he urges that it is impossible to have conditions some of which begin in future and some of which begin at once. For my part I am unable to accept that argument. Leave out the matter of construction at the moment and consider the sense behind it. Quite obviously what is envisaged is an application, then a dealing with that application. Whilst this takes place, the respondents in this case, or anybody in the position of the respondents is fully covered. It would be quite impracticable to impose stringent conditions at once without giving the industry an opportunity of controlling their effluent in such a way as not to exceed the maximum conditions which the river board thought proper to impose. There must be some interregnum, and if that interregnum is not dealt with, there is a gap and a period during which the company concerned could be prosecuted, because there would be no consent covering that period till the application had been dealt with. Accordingly one would expect to find here that there were stringent conditions imposed to come into effect at some date in the future, and with some interregnum during which the respondents could carry on their business, and at the same time prepare their way to deal with the stringent conditions at a later date. That is, as it seems to me, the practical side.

What has happened here is that there is only one set of conditions; the effect seems to be that stringent provisions are laid down to come into force at a later date as is envisaged by s 1(4), namely on 1 April 1968 with, as it were, a proviso that until that date is reached those conditions should be satisfied or deemed to be satisfied if the respondent keep to the conditions which they had set out or asked for in their application. It seems to me here that there is only really one set of conditions and not two sets of conditions.

The second way in which counsel for the respondents puts this case is by relying on s 5 of the 1961 Act. He said that however one looks at this, here are the conditions for a period from 13 October 1966 to the end of March 1968 a period of less than two years, and thereafter they are varied as from 1 April 1968 by a different set of conditions. He would say that even if it were proper to combine these as it were in one document, the first period before the variation must by reason of s 5 be a period of two years, whereas this was only 18 months. Again one looks to see whether this is a case of conditions being varied, or whether as I think is the true view, there is but one set of conditions, but for a period they are deemed to be complied with by a lesser performance, as it were, of the conditions. I prefer that view, bearing in mind what quite clearly, as it seems to be, is the proper practice under this Act of giving anybody in the position of the respondents an opportunity of changing their system of work so that their effluent will not offend the more stringent conditions coming into force in the future. For those reasons I think that the justices came to a wrong decision and I would send this case back to them with a direction to continue the hearing.

ASHWORTH J. I agree.

Page 29 of [1970] 1 All ER 22

CANTLEY J. I agree.

Appeal allowed. Case remitted. Leave to appeal to the House of Lords granted, the court certifying under s 1 of the Administration of Justice Act 1960 that a point of law of general public importance was involved, viz—(i) whether, in granting consent under s 1 of the Rivers (Prevention of Pollution) Act 1961 to a discharge of trade effluent to a stream, a river authority may validly impose consecutive conditions, or conditions with consecutive terms, which are so framed that some thereof have effect for a specified period, while others thereof only take effect on a specified date at the end of the said period, and (ii) if so, whether the said specified date may be a date less than two years after the date of the granting of such consent.

Solicitors: Kingsford, Dorman & Co and Dyson Bell & Co agents for Ian Drummond, Nottingham (for the appellant); Allan Jay & Co agents for Potter, Brooke Taylor & Wildgoose, Matlock (for the respondents).

N P Metcalfe Esq   Barrister.

Note

Airlines Airspares Ltd v Handley Page Ltd and Another

[1970] 1 All ER 29

Categories:        COMPANY; Insolvency; CONTRACT        

Court:        VACATION COURT, CHANCERY DIVISION        

Lord(s):        GRAHAM J        

Hearing Date(s):        4, 11 SEPTEMBER 1969        

Company – Receiver and manager – Appointed by debenture-holders – Powers – Adoption of contracts made between company and unsecured creditors – Agreement by company to pay special commission to X in respect of goods sold – Whether receiver can refuse to adopt agreement.

Notes

For the effect on current contracts of the appointment of a receiver and manager, see 6 Halsbury’s Laws (3rd Edn) 515, 516, para 1000, and for cases on the subject, see Digest (Repl) 830, 5427–5432.

Cases referred to in judgment

Botibol (decd), Re, Botibol v Botibol [1947] 1 All ER 26, 39 Digest (Repl) 77, 877.

Jones v Lipman [1962] 1 All ER 442, [1962] 1 WLR 832, 50 Digest (Repl) 428, 1318.

Southern Foundries (1926) Ltd v Shirlaw [1940] 2 All ER 445, [1940] AC 701, 109 LJKB 461, 164 LT 251, 9 Digest (Repl) 557, 3689.

Motion

The plaintiffs, Airlines Airspares Ltd, by this motion in the action, applied for the continuance of an interim injunction granted ex parte by Graham J on 4 September 1969 which restrained the first defendants, Handley Page Ltd, from selling the shares in their newly-formed subsidiary named Handley Page Aircraft Ltd (hereinafter called ‘Aircraft’), until trial of the action.

By an agreement dated 23 February 1966 Keegan Aviation Ltd and T D Keegan (hereinafter jointly called ‘Keegan’) entered into an agreement with Handley Page the effect of which was that Handley Page would pay to Keegan a special commission

Page 30 of [1970] 1 All ER 29

of £500 in respect of every aircraft of a particular type sold by Handley Page. The type of aircraft in question was one particularly suitable for the aviation executive market and was known as the ‘Jetstream’. Keegan had told Handley Page of the requirement for such an aircraft and given preliminary assistance in the relevant technical and commercial fields. In addition to the special commission, Keegan was given an option to share with Handley Page the right to sell subject to a separate agreement anywhere in the world except those territories where Handley Page were already selling or intending to sell, and listed in cl 2. All right and interest in this agreement was assigned to the plaintiffs on 11 September 1968. It was thought the Jetstream was likely to be a very successful aircraft; however, a short time prior to the present proceedings Handley Page ran into financial difficulties as a result of which Kenneth Russell Cork, the second defendant, was appointed on 7 August 1969 to be receiver and manager by the debenture-holders, Barclays Bank Ltd, by virtue of cl 8 of a debenture dated 28 October 1968. The receiver deposed in his affidavit that with a view to carrying out his duties in what, in his judgment, was the most effective way he had caused Handley Page to form the subsidiary company, Aircaft, and by an agreement dated 15 August 1969 Handley Page assigned to Aircraft such parts of their undertaking, including goodwill and designs as represented an economically viable business. This in effect meant the business in connection with the Jetstream aircraft. The receiver deposed further that he was now in the midst of negotiations for the sale of the shares of Aircraft to American interests, which he hoped to complete shortly and that these negotiations would be held up so long as the injunction continued. At the same time, the receiver had made it clear in his letter of 19 August 1969 to Mr T D Keegan and his further letter of 26 August 1969 to the plaintiff’s solicitors that he was not prepared to adopt the contract made by Handley Page to pay to the plaintiffs £500 for each Jetstream aircraft sold.

The plaintiffs commenced an action and they now moved for a continuance of the above-mentioned injunction until satisfied that provision had been made for the payment of their special commission in respect of all future sales.

Gavin Lightman for the plaintiffs.

J E F Lindsay for the first defendants, Handley Page Ltd and the second defendant, its receiver and manager.

11 September 1969. The following judgment was delivered.

GRAHAM J. having stated the facts as set out above continued: Counsel for the plaintiffs argues as follows: Handley Page is under an obligation, which is derived from an implied term of the contract and from general equitable principles, not to frustrate or put it out of its power to implement the agreement which it has entered into with the plaintiffs. In support of this proposition, he relies on Southern Foundaries (1926) Ltd v Shirlaw ([1940] 2 All ER 445 at 454, [1940] AC 701 at 716). Secondly, if it is said against the plaintiffs that the undertaking has already been transferred and it is now too late and nothing can be done about it, that argument is unsound. It is unsound because in such circumstances the subsidiary will be treated by the court as the alter ego of the parent and the plaintiffs can obtain relief in respect of their contract against the parent and its subsidiary or either of them. Aircraft is, at present, admittedly a wholly-owned subsidiary of Handley Page, and as long as it remains so the court can and will enforce the agreement against it. In this connection counsel relies on Jones v Lipman.

Thirdly, Handley Page could only succeed if they could show that the receiver and manager appointed by a debenture-holder is in a better position than the company, in that he can legitimately avoid a contractual obligation such as the present. Counsel

Page 31 of [1970] 1 All ER 29

for the plaintiffs concedes that the receiver cannot be compelled to perform such a contract, but he contends that the receiver cannot legitimately frustrate the contract by a transfer to a subsidiary such as has been effected here. The onus is on the defendants to show that the receiver is in a better position than the company and that the defendants can lawfully do what they have done. They have cited no authority which justifies such a contention. On the contrary, Re Botibol (decd), Botibel v Botibel is against it and it may properly be said here that the receiver has, by his actions, rendered himself liable in tort by inducing Handley Page to commit a breach of contract. There is, it is said, a clear distinction between declining to perform a contract, which the receiver is entitled to do, and frustrating the contract by his own act, which he is not entitled to do. Counsel for the defendants on the other hand, argues that the plaintiffs’ contentions are misconceived.

First, he says this case is entirely different from that of Jones v Lipman. That was a case of specific performance of a contract to sell land where the first defendant had purported to frustrate the whole transaction by selling the land in question after the date of his contract with the defendant to a company, the second defendant, which he had acquired purely for the purpose in question. The court held the whole transaction was a sham, that a decree of specific performance would be made against the first defendant, and that as he controlled the second defendant he was in a position to cause the contract to be completed. Here, says counsel, there is no question of a sham transaction and the receiver is doing his best to realise the best price for those of the first defendants’ assets which remain and are saleable, a course which is in the best interests of all the creditors, secured and unsecured.

Further, if, as in Jones v Lipman, the contract is of such a nature that specific performance is a normal remedy, a plaintiff could expect to obtain it both against a parent and a subsidiary company; but if, as in the present case, breach of the contract normally only leads to damages—and it is accepted here that the receiver cannot be compelled to perform the contract—then Jones v Lipman cannot have relevance.

Secondly, counsel says that the plaintiffs are really trying by the action, to be placed in a preferential position over all other unsecured creditors of which there is a large number. Yet, when the position is fairly examined, it will be seen that the plaintiffs are in no different position from any other unsecured creditor, in that they have an ordinary trading contract with the company which the receiver can either adopt or decline. There is no evidence that the option granted by cl 2 of the agreement has been adopted by the plaintiffs and all it stands to receive under that agreement is £500 per aircraft sold. It would not be equitable for the receiver to prefer the plaintiffs to other unsecured creditors, and it is in the best interests of all such creditors that he should be able to sell that part of Handley Page’s business which will constitute a viable unit in the way which will secure the highest price. If, in so doing, he does decline to take over the plaintiffs’ contract, he may, of course, render the company liable in damages and may also, to some extent, at any rate damage the reputation of Handley Page as a trustworthy company which can be expected to honour its contracts. This, however, the defendants say, he is entitled to do so long as the realisation of the net assets of the company to the best advantage is not impaired. There may be cases where declining to adopt a contract of the company would so seriously impair the goodwill of the company that such realisation would be adversely affected, but that is not the case here. There is no evidence that it would so impair such realisation, nor that it would seriously damage the prospects of Handley Page trading successfully in the future if it ever does so, and in fact the only goodwill of any real value, namely, that connected with the design, manufacture and prospects of sale of the Jetstream, has been transferred to Aircraft. It is not suggested that Handley Page itself is likely to do any active trading in the future.

Thirdly, it is said that to merit the grant of an injunction, the acts complained of

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must threaten an invasion of the plaintiffs’ legal rights and the relief asked for must relate to those rights. Here, the relief asked for relates to the transfer of shares in Aircraft and if that is so the plaintiffs must show that they have some legal rights in respect of the shares in question, and no such right has been shown. This argument seems to me to beg the real question the answer to which, in my judgment, determines the issue in this case. That question may be stated as follows. Is a receiver and manager appointed by debenture-holders, in a stronger position from the legal point of view than the company itself, in respect of contracts between unsecured creditors and the company? Assuming that the company, on the authority of Southern Foundries (1926) Ltd v Shirlaw cannot put it out of its own power to perform contracts it has entered into, can a receiver in effect do so on its behalf if, at the same time, he has made it clear that he is not going to adopt the contract anyway, and if, as is, in my judgment, the case here, the repudiation of the contract will not adversely affect the realisation of the assets or seriously affect the trading prospects of the company in question, if it is able to trade in the future?

Counsel, when I asked them, were not able to produce any authority which gave a direct answer to this question, but there is a helpful passage dealing generally with ‘current contracts’ in Buckley on the Companies Actsa. This passage, to my mind, makes it clear that, in the author’s view, the answer to the question I have posed above must be ‘yes’. It seems to me that it is common sense that it should be so, since otherwise almost any unsecured creditor would be able to improve his position and prevent the receiver from carrying out, or at any rate carrying out as sensibly and as equitably as possible, the purpose for which he was appointed. I therefore hold that the receiver, within the limitations which I have stated above, is in a better position than the company qua current contracts and that, in the present case, the receiver, in doing what he has done and purporting to do in connection with the transfer of Aircraft’s shares, is not doing anything which the plaintiffs are entitled to prevent by this motion.

Further, having now heard the full argument and considered the defendants’ evidence in the receiver’s affidavit which was, of course, not available on the ex parte motion, in my judgment the balance of convenience is in favour of refusing rather than of continuing the injunction. There are a number of obviously very important considerations from the point of view not only of the company but also of the public at large set out in the receiver’s affidavit which, in my judgment, tip the scales in favour of the defendants in this respect.

In the result, as already stated at the end of the hearing, I discharge the interim injunction against the defendants.

Application dismissed. Injunction discharged.

Solicitors: Clifford Harris & Co (for the plaintiffs); Durrant, Cooper & Hambling (for the defendants).

E H Hunter Esq   Barrister.

Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd

[1970] 1 All ER 33

Categories:        BANKING AND FINANCE        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        ROSKILL J        

Hearing Date(s):        14, 15, 16, 22, 23, 24 OCTOBER, 5 NOVEMBER 1969        

Bank – Lien – Cheque – Banker’s lien on cheque presented for collection – Customer having two accounts – Agreement that account in debit be frozen for four months in absence of materially changed circumstances – Voluntary liquidation after two months – Cheque received for credit of current account few hours before liquidation – Proceeds credited next day – Whether bank entitled to set-off credit balance in current account against account in debit.

The plaintiffs maintained two bank accounts with the defendants (‘the bank’), a no 1 account which was their original trading account, and a no 2 account which was opened in April 1968 as a new trading account when the no 1 account was in debit. It was agreed, inter alia, between the parties on the opening of the no 2 account that in the absence of materially changed circumstances the no 1 account would be frozen for the ensuing four months. On the morning of 12 June 1968 a cheque for £8,611 5s 10d drawn by G in favour of the plaintiffs was paid into a branch of the bank in another town for the credit of the plaintiffs’ no 2 account. In the afternoon of the same day, by resolution duly passed at an extraordinary general meeting and confirmed at a meeting of their creditors, the plaintiffs went into voluntary liquidation. G’s cheque was credited to the no 2 account on 13 June and cleared on 14 June 1968. This cheque, together with the proceeds of two other cheques paid into the no 2 account on 12 and 13 June and two sums debited therefrom on 14 June, left the plaintiffs with a credit balance in the no 2 account of £8,634. At the time of the resolution to wind up, the plaintiffs’ no 1 account had been frozen for some weeks and was overdrawn by £11,879. On 19 June 1968 an official of the bank informed the liquidator in writing that the bank proposed to prove for the net balance only between the two accounts, claiming that the bank was entitled to set-off the credit balance of the no 2 account against the debit balance on the no 1 account. At no time did the bank physically combine or consolidate the two accounts, and the plaintiffs challenged the bank’s purported exercise of the right of lien and claimed that the credit balance on the no 2 account (including the proceeds of G’s cheque) should be available for the general body of creditors and that the bank should seek to prove in the liquidation as an unsecured creditor.

Held – The bank was entitled to set-off the credit balance on the no 2 account (including G’s cheque) against the debit on the no 1 account, because—

(i) a banker’s right of lien arose whenever a customer was indebted to a banker as a banker on the customer’s general balance of account, and the lien continued so long as the customer remained so indebted (see p 48 d, post);

(ii) if a banker agreed with his customer to open two or more accounts, the banker had, by virtue of his lien, the right to move either assets or liabilities from one account to the other without the customer’s consent, unless the banker had expressly or impliedly agreed with his customer that he would not do so, whether for a limited or for an indefinite period or for such period as the banker/customer relationship subsisted (see p 49 b, post);

Per Roskill J: the question to be asked in every case was ‘what was the agreement?’, and the ascertainment of the answer involved also answering the question ‘what was the duration of the agreement?’ (see p 49 c, post).

(iii) the right of lien was exercisable over all securities (including cheques and their proceeds) of any kind which came into the possession of the banker as banker and

Page 34 of [1970] 1 All ER 33

which belonged to the customer in the same right as that in which he had incurred his indebtedness to the banker (see p 49 d and e, post);

(iv) applying the principles stated under (i) to (iii) supra, on the facts of the present case the right of lien, although abrogated by the bank under the April 1968 agreement for a period of four months in the absence of materially changed circumstances, became enforceable as soon as the banker/customer relationship determined, as it did on 12 June 1968 by reason of the resolution to wind up (see p 52 g, post); and the bank’s right was not affected by the absence in the books it maintained by any physical consolidation or combination of the two accounts (see p 48 c).

Re Keever (a bankrupt) ex parte The Trustee of the Property of the Bankrupt v Midland Bank Ltd [1966] 3 All ER 631 followed.

Re E J Morel (1934) Ltd [1961] 1 All ER 796) disapproved.

Notes

For combination of different accounts, see 2 Halsbury’s Laws (3rd Edn) 172, 173, para 322, and for a banker’s lien and its exercise see ibid, pp 210–213, paras 390–395, and for cases on the subject, see 3 Digest (Repl) 321–331, 992–1048.

Cases referred to in judgment

Bolland v Bygrave (1825) Ry & M 271, 171 ER 1017, 3 Digest (Repl) 321, 994.

Bradford Old Bank Ltd v Sutcliffe [1918] 2 KB 833, 88 LJKB 85, 119 LT 727, 3 Digest (Repl) 296, 914.

Brandao v Barnett (1846) 3 CB 519, 12 Cl & Fin 787, [1843–60] All ER Rep 719, 7 LTOS 525, 136 ER 207, 3 Digest (Repl) 326, 1017.

Davis v Bowsher (1794) 5 Term Rep 488, 101 ER 275, 3 Digest (Repl) 325, 1014.

Eros Films Ltd, Re [1963] 1 All ER 383, [1963] Ch 565, [1963] 2 WLR 496, Digest (Cont Vol A) 196, 7349a.

European Bank, Re, Agra Bank Claim (1872) 8 Ch App 41, 27 LT 732, 3 Digest (Repl) 328, 1029.

Garnett v McKewan (1872) LR 8 Exch 10, [1861–73] All ER Rep 686, 42 LJ Ex 1, 27 LT 560, 3 Digest (Repl) 243, 642.

Giles v Perkins (1807) 9 East 12, 103 ER 477, 3 Digest (Repl) 229, 565.

Great Western Ry Co v The London and County Banking Co Ltd [1900] 2 QB 464, 69 LJQB 741, 82 LT 746; rvsd HL [1901] AC 414, [1900–03] All ER Rep 1004, 70 LJQB 915, 85 LT 152, 3 Digest (Repl) 181, 316.

Greenhalgh (W P) & Sons v Union Bank of Manchester Ltd [1924] 2 KB 153, [1924] All ER Rep 338, 93 LJKB 844, 131 LT 637, 3 Digest (Repl) 180, 313.

Greenwood Teale (T & H) v William Williams, Brown & Co (1894) 11 TLR 56, 3 Digest (Repl) 331, 1046.

Joachimson (N) (a firm name) v Swiss Bank Corpn [1921] 3 KB 110, [1921] All ER Rep 92, 90 LJKB 973, 125 LT 338, 3 Digest (Repl) 193, 376.

Keever (a bankrupt), Re, ex parte The Trustee of the Property of the Bankrupt v Midland Bank Ltd [1966] 3 All ER 631, [1967] Ch 182, [1966] 3 WLR 779, Digest (Cont Vol B) 59, 7903a.

Midland Bank Ltd v Reckitt [1933] AC 1, [1932] All ER Rep 90, 102 LJKB 297, 148 LT 374, 3 Digest (Repl) 268, 770.

Misa v Currie (1876) 1 App Cas 554, [1874–80] All ER Rep 686, 45 LJQB 852, 35 LT 414, 3 Digest (Repl) 327, 1021.

Morel (E J) (1934) Ltd, Re [1961] 1 All ER 796, [1962] Ch 21, [1961] 3 WLR 57, Digest (Cont Vol A) 50, 915a.

Mutton v Peat [1900] 2 Ch 79, 69 LJCh 484, 82 LT 440, 3 Digest (Repl) 305, 955.

Sutters v Briggs [1922] 1 AC 1, 91 LJKB 1, 125 LT 737, 25 Digest (Repl) 442, 239.

Cases and authorities also cited

Forth v Simpson (1849) 13 QB 680.

Page 35 of [1970] 1 All ER 33

Hatton v Car Maintenance Co Ltd [1915] 1 Ch 621, [1911–13] All ER Rep 890.

Johnson v Roberts (1875) 10 Ch App 505.

Westminster Bank Ltd v Zang [1966] 1 All ER 114, [1966] AC 219.

Byles on Bills of Exchange (22nd Edn), p 411.

Chalmers on Bills of Exchange (13th Edn), p 291.

Paget on Law of Banking (7th Edn) pp 125 et seq, 289 et seq.

Action

In this action commenced by writ dated 7 January 1969 the plaintiffs, Halesowen Presswork & Assemblies Ltd, claimed the sum of £8,634 7s 4d, alternatively £8,611 5s 10d, as money deposited with the defendant bank, Westminster Bank Ltd, in one of two accounts maintained by the plaintiffs and over which the bank purported to exercise a right of lien on the plaintiffs’ going into voluntary liquidation on 12 June 1968. The facts are set out in the judgment.

Allan Heyman QC for the plaintiffs.

R M Yorke for the bank.

Cur adv vult

5 November 1969. The following judgment was delivered.

ROSKILL J read the following judgment. The plaintiff company is in voluntary liquidation. The requisite resolution to wind up was passed at an extraordinary general meeting held shortly before 2.30 pm on 12 June 1968. The resolution to wind up was confirmed at a subsequent meeting of the plaintiffs’ creditors duly held at 2.30 pm that same afternoon, notice convening that meeting of creditors have been duly given pursuant to s 293 of the Companies Act 1948 on 20 May 1968.

On the morning of 12 June 1968 a cheque for £8,611 5s 10d drawn by Girlings Ltd on a branch of Lloyds Bank in favour of the plaintiffs was paid into the defendant bank’s Halesowen branch for the credit of the plaintiffs’ no 2 account at the defendant bank’s Colmore Row branch at Birmingham where the plaintiffs at that date maintained two banking accounts respectively numbered no 1 and no 2, to which I shall refer in more detail hereafter. The precise time when that cheque was paid in at the bank’s Halesowen branch was not certain. It was, however, conceded that the cheque came into the physical possession of the bank sometime, probably a few hours, before the resolution to wind up was passed. The proceeds of the cheque were not however credited to the plaintiffs’ no 2 account at the bank’s Colmore Row branch until 13 June 1968. The cheque itself was not cleared until 14 June 1968. Both the crediting of the cheque and its clearance, therefore, took place after the resolution to wind up was passed, although, as I have already emphasised, the cheque was physically received by and passed into the possession of the bank before the resolution to wind up was passed.

There were on 12 and 13 June 1968 before the crediting of this cheque comparatively small credit balances on the no 2 account but the effect of crediting another cheque on 12 June and this cheque and also a third cheque on 13 June was to increase the credit balance on the no 2 account to £9,709 12s 4d. Two subsequent debits to the no 2 account on 14 June (on which no issue arises) reduced that balance to £8,634 7s 4d. At the time of the resolution to wind up, the plaintiffs’ no 1 account at the Colmore Row branch which had been frozen for some weeks previously was overdrawn to the extent of £11,879 4s.

The central issue in this case is whether the bank is entitled to set-off that credit balance of £8,634 7s 4d on the no 2 account or alternatively the proceeds of the Girling cheque, namely, £8,611 5s 10d against that debit balance on no 1 account of £11,879. Although in the initial stages of the trial it was suggested that the considerations applicable to the whole of the credit balance on no 2 account might be different from those applicable to the cheque or the proceeds of the cheque itself

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(the actual difference is only £23 1s 6d), it became clear as the argument proceeded that a decision on the entitlement to the cheque or to its proceeds must govern the decision regarding the entire credit balance. Neither counsel sought to argue that if their respective basic contentions regarding the cheque or its proceeds were wrong, a different conclusion could be properly reached regarding the entire credit balance. Accordingly it is not necessary to consider the two matters separately.

The plaintiffs by their liquidator, Mr Bernard Phillips, challenged the bank’s claim to set-off the two balances one against the other and claimed that the credit balance on the no 2 account (including, of course, the proceeds of the Girling cheque) belonged to the plaintiffs and should be available for the benefit of the general body of the plaintiffs’ creditors of whom the bank is one, leaving the bank to prove in the liquidation as an unsecured creditor in respect of the larger debit balance on the no 1 account.

The plaintiffs put their case in two ways. First they asserted that at a meeting at the bank’s head office, no 41 Lothbury, in the city of London, on 4 April 1968, at which certain senior bank officials were present on the bank’s side and Mr Phillips (who was advising the plaintiffs professionally before he became liquidator) and Mr Frank Lewis, a director of the plaintiffs, were present on the plaintiffs’ side, an express oral agreement was made that in the event of the plaintiffs agreeing to open a no 2 account at the bank’s Colmore Row branch the bank would in no circumstances seek to set-off any balance on that no 2 account against the frozen overdraft on the no 1 account. Secondly, they claimed that even if they were mistaken as to the existence of any such agreement (which all the bank officials present emphatically denied) the bank had as a matter of law no right to set-off the credit balance on the no 2 account against the frozen overdraft on the no 1 account. This last contention was strongly challenged by the bank. As both counsel agreed, this latter contention raises difficult questions of law of general importance both to liquidators and to banks.

The first 2 1/2 days of the trial were almost entirely devoted to hearing evidence and submissions relating to the first of these issues which is entirely one of fact. [His Lordship referred to the evidence on this first issue and stated that the plaintiffs, on whom the onus of proof rested, had failed to satisfy him that any agreement such as they sought to establish had been made on 4 April 1968 and continued:] Accordingly, the question of law to which I have just referred arises for direct decision. But before considering this question it is necessary to relate the factual background to this case at some length and to give my reasons for the conclusion of fact to which I have just referred.

The plaintiffs were one of three companies in which a family named Lewis were interested. I have already mentioned Mr Frank Lewis. His father was Mr Jack Lewis. The plaintiffs’ original name was Kitchen Utensil Co Ltd. The company’s two directors were Mr Frank Lewis and Mr Alfred Frank Harris. Its capital was £1,000 in £1 shares, all fully paid up. The other two companies were Lewis Distributors Ltd (formerly Mirroware Ltd) and Jack Lewis Property (Halesowen) Ltd. The plaintiffs originally kept a single banking account at the bank’s Colmore Row branch in Birmingham. They kept their trading account at Lloyd’s Bank, Halesowen. This fact disturbed the bank for reasons which can be readily understood since there were no movements on the single Colmore Row account from which the bank could follow the plaintiffs’ changing fortunes or misfortunes. As Mr Gregory put it with reference to the meeting on 4 April 1968:

‘I was annoyed because we had not got the normal advantages of the trading account to watch the trading and to debit interest. The dormant overdraft gets larger and larger and we have no redress. We meet this from time to time. If I find it, I insist as far as I can that the trading account is with the bank which is lending the money.’

Page 37 of [1970] 1 All ER 33

The other two companies in the group banked in London at the bank’s branch at Marble Arch. When the story opens, Lewis Distributors Ltd were indebted to the bank to the extent of no less than £143,289, and John Lewis Properties (Halesowen) Ltd were indebted to the bank to extent of £5,387. The plaintiffs’ overdraft of £11,879 at the Colmore Row branch was modest in comparison with Lewis Distributors Ltd’s overdraft at the Marble Arch branch. The total indebtedness of the group was substantially over £150,000 and not surprisingly the bank became worried. Mr Jack Lewis had given a personal guarantee for some, but not all, of Lewis Distributors Ltd’s overdraft. A considerable part of that overdraft was unsecured. The plaintiffs’ overdraft at the Colmore Row branch was wholly unsecured. The matter was complicated by the fact that Lewis Distributors Ltd was one of the plaintiffs’ principal creditors. It is clear from the opening letters from, and the memoranda of, the bank that the bank was putting considerable pressure on both Mr Jack Lewis and Mr Frank Lewis but with little practical success. As a result, the bank was seriously contemplating calling in these substantial loans and in the event of default taking steps compulsorily to wind up both the plaintiffs and Lewis Distributors Ltd. At this point Mr Frank Lewis consulted Mr Bernard Phillips, a chartered accountant with great experience of acting as liquidator. Although the bank at one time thought that Mr Lewis had consulted Mr Phillips as a friend it is clear both from the documents and from the oral evidence that Mr Phillips was consulted professionally. After a telephone conversation on 26 February 1968 between Mr Phillips and a senior official of the bank, Mr Phillips wrote to the Colmore Row branch on 26 February. Amongst the securities for the giving of which the bank had previously been pressing were debentures from both the plaintiffs and Lewis Distributors Ltd in the bank’s favour and also cross-guarantees by each of those companies in the bank’s favour. In his letter of 26 February, Mr Phillips stated:

‘… it is clear that a proper realisation of the company’s assets would enable the company to discharge all its debts and obligations in full.’

As regards the bank’s request for debentures and cross-guarantees, he pointed out that, in the event of liquidation, these securities might be open to attack as fraudulent preferences. Mr Phillips’s intervention and the contents of the letter of 26 February produced further discussions and memoranda within the bank, as well as some correspondence between Mr Lewis, Mr Phillips and the bank. It is to be noted that in a letter dated 15 March 1968 Mr Phillips informed the bank that the directors were of the opinion that the plaintiffs were ‘breaking even at this juncture’.

Finally on 4 April 1968, the meeting was held at the bank’s head office at no 41 Lothbury in the city of London. There were present on the bank’s side Mr Gregory, then an assistant general manager for the northern division of the bank who had previously been the manager of the bank’s Colmore Row branch in Birmingham and was therefore fully familiar with the whole history of the financial transactions of the Lewis group of companies; Mr Alford, an assistant general manager of the bank for the Metropolitan West district which included the Marble Arch branch, and Mr F G Bell, district manager of the area which included the Marble Arch branch. Mr Bernard Phillips and Mr Frank Lewis were present on the plaintiff’s side. [His Lordship referred to the taking of notes at the meeting by Mr Bell on the bank side and to the subsequent preparation of the bank’s memorandum and stated that he had no hesitation in accepting Mr Bell’s evidence as to the history of that document. Neither the bank’s memorandum nor Mr Phillips’ contemporary notes, nor relevant letters dated 17 and 22 April 1968 passing between Mr Gregory and Mr Lewis made any reference to an agreement of the kind which the plaintiffs alleged had been made. His Lordship reviewed subsequent correspondence between the parties and continued:] I have to decide whose recollection I accept. I accept the evidence of the bank’s witnesses which was impressively given, and I reject the evidence given

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on behalf of the plaintiffs by Mr Phillips and Mr Lewis. If, therefore, the plaintiffs are to succeed in their claim against the bank that the bank is not entitled to set-off the credit balance on the no 2 account against the frozen overdraft on the no 1 account it must be because their contentions are correct in point of law and not because of any express oral agreement such as is alleged to have been made on 4 April 1968, for I am convinced that no such agreement was made.

I therefore turn to consider this question. I have already pointed out that the bank claimed to be entitled so to do by letter dated 19 June 1968 to the liquidator within seven days of the resolution to wind up. It will be observed that earlier in this judgment I have used the word ‘set-off’. I have used this word for convenience, to describe the right which the bank claims to possess. I do not use the word at this juncture in any technical sense, for the exact nature of the right (if any) possessed by the bank was a matter of controversy at the trial and requires examination hereafter. Sometimes that word has in the past been used to describe the nature of a banker’s right in comparable circumstances. Sometimes the phrase used is a ‘right to combine two or more accounts’. Sometimes the phrase used is a ‘right to consolidate two or more accounts’. Sometimes the right is described as ‘the exercise of a banker’s lien’, a phrase which, as will appear hereafter, counsel for the bank contended was the most accurate description of the right which the bank was claiming to exercise in this case. It was said that the right of set-off or of combination or of consolidation was but a consequence of, or analogous to, the exercise by a banker of the lien which the law had at least since the beginning of the last century accorded to a banker with whom a customer maintained two or more accounts.

Counsel for the plaintiffs put in the forefront of his argument one single fact. Whatever else was not agreed on 4 April 1968, one matter (among others) was clearly agreed. The single existing account at the Colmore Row branch which was to become the no 1 account as soon as the new trading account (the no 2 account) was opened, was to be frozen and the no 2 account was to be maintained in credit. The proposed freezing of the no 1 account is recorded in the bank memorandum of the meeting on 4 April 1968. It is mentioned in Mr Phillips’ notes. It is mentioned in the bank’s letter of 17 April 1968 to Mr Frank Lewis, the conditions of which were accepted by Mr Lewis in a letter to the bank dated 22 April 1968. Counsel for the plaintiffs argued that even if there were no express oral agreement not to set-off the balances on the two accounts against each other, it was implicit in the arrangements made on 4 April, and confirmed in the correspondence to which I have referred that there should at no time by any set-off exercised since the sudden purported exercise of the right of set-off must defeat the whole purpose of the arrangement. He contended that once the no 1 account was frozen it became for all practical purposes a loan account. He prayed in aid the judgment of Buckley J in Re E J Morel (1934) Ltd, to which I shall have to refer again later. The learned judge said ([1961] 1 All ER at 802, [1962] Ch at 31, 32):

‘I think that counsel for the liquidator is right in saying that that principle [ie the principle of setting-off one credit balance against another debit balance] is applicable where the accounts are current accounts, but is not applicable where one of the accounts is not a current account but is a loan account, or, I think, an account such as the No 1 account here, which having been frozen in the way that I have described, and being no longer capable of being operated in the ordinary way as a current account, partakes of the character of a loan account.’

Counsel for the plaintiffs argued that there was clear and binding authority that balances on a loan account and on a current account could not be set-off against each other, and that if a bank made an arrangement such as was made in the present

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case the bank was not entitled in the event of liquidation or bankruptcy ensuing to claim to rank as a special class of preferred creditor to the extent of the credit balance on the current account but must prove as an unsecured creditor for the debit balance whilst making the credit balance available for the general body of creditors.

The only qualification on the rigorous logic of this argument which counsel for the plaintiffs would admit arose by reason of the provision in the letter of 17 April that—

‘… in the absence of materially changed circumstances in the meantime we for our part will adhere to the present scheme of arrangements for this period of time.’

The phrase ‘this period of time’ in the context plainly meant a period of four months or thereabouts from the date of the letter. Four months had not elapsed between the making of the arrangement and the resolution of 12 June. Counsel therefore argued that the bank could only escape from the arrangement had there been any materially changed circumstances in the period before the resolution to wind up. Anything that happened by reason of, or subsequent to, the resolution was too late to afford the bank any remedy. The rights and liabilities crystallised at the moment of the passing of the resolution. If the bank was bound by the arrangement at the moment of the resolution to wind up, then the passing of the resolution did not and could not afford the bank an escape from the antecedent agreement. Accordingly, at the time when the bank claimed to exercise the right of set-off it was claiming to exercise a right which it had previously foregone by reason of the arrangements of 4 April 1968, and never subsequently acquired or reacquired those rights.

Before considering this argument in detail, the authorities on which it is based and the bank’s answer to it, it will be convenient briefly to mention a second argument which counsel advanced when opening the case for the plaintiffs but which ultimately, on having heard the way in which counsel for the bank put the bank’s case, he properly abandoned. Anticipating that the bank might seek to take advantage of the mutual set-off provisions of s 31a of the Bankruptcy Act 1914, as applied to companies by s 317b of the Companies Act 1948, counsel argued that the bank was not entitled to do so since it was at the material time on notice of an act of bankruptcy by the plaintiffs, namely the notice under s 293 of the Companies Act 1948, dated 20 May 1968, convening a meeting of creditors for 12 June 1968. In Re Eros Films Ltd Buckley J held that the publication of a notice under s 293 of the Companies Act 1948 was analogous to the filing of a declaration of inability to pay debts under the bankruptcy legislation. Counsel for the plaintiffs therefore argued that once the bank knew of the publication of the notice on 20 May 1968, it was, following this decision of Buckley J, thereafter debarred from relying on the mutual set-off provisions of s 31 of the 1914 Act as applied by s 317 of the 1948 Act.

The reply of counsel for the bank to this argument was to make clear that he was not relying on s 31 as so applied. He accepted that if the bank was wrong on its main contention, s 31 could not avail, while if the bank was right on its main contention it did not need to rely on s 31. I say no more about the point, which I only mention for the sake of completeness. The bank also pleaded s 45 of the Bankruptcy Act 1914, but this point was not pressed in argument and it is not necessary to discuss this matter further.

I therefore return to the central point in the case. Counsel for the plaintiffs relied principally on three cases, the first of which is unquestionably binding on me for what it decided, and the other two of which, although not technically binding, are of persuasive authority. It is, however, a striking fact that, as both learned counsel

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agreed, in none of these three cases were certain other earlier relevant authorities, some equally binding and others equally persuasive, cited to the courts respectively concerned. I propose, therefore, first to refer to these three authorities, then to refer to certain other authorities to which I have been referred, principally by counsel for the bank, then to seek to extract from the totality of the authorities (as counsel for the bank did in his argument) what I conceive to be the basic principles underlying all these decisions, and finally to apply those basic principles to the facts of the present case which, so far as now relevant, are not in dispute.

The first case relied on by counsel for the plaintiffs and clearly the strongest in his favour is Bradford Old Bank Ltd v Sutcliffe, a decision of the Court of Appeal consisting of Pickford, Bankes and Scrutton LJJ. The facts of this case are somewhat complex, and some issues were raised which are irrelevant for present purposes. In 1894 a company named Samuel Sutcliffe & Son Ltd arranged with the plaintiff bank for a fixed loan of £3,600 and for a drawing credit account of £2,500. They deposited debentures to the extent of £6,100 and also obtained for the plaintiff bank joint and several guarantees from two of their directors, one of whom was named Frank Sutcliffe. In August 1898 Frank Sutcliffe became insane. The plaintiff bank learned of this fact in December 1899. At that time the company owed £3,400 on loan account and £269 5s on current account. The company continued to bank with the plaintiff bank until 1907 when that bank merged with another, and the current and loan accounts were both transferred into the name of the new bank. In 1912 the plaintiff bank demanded payment from the company and enforced the debentures which realised £827 19s 1d. In 1915 the plaintiff bank sued Mr Frank Sutcliffe’s committee for £4,280 3s 4d, being the balance of principal and interest on the loan account and £1,395 11s 7d, being the balance of principal and interest, on the current account less the sum of £827 19s 1d, realised on the debentures. The trial judge (A T Lawrence J) held—and his conclusion was not challenged in the Court of Appeal—that the guarantee of Mr Frank Sutcliffe ceased as a continuing guarantee on the bank’s becoming aware of his insanity but that the liability for the debts accrued as at that date continued. He also held that subsequent payments into the current account discharged the liability in respect of the guarantee on that account and this conclusion also was not challenged in the Court of Appeal. The question then arose whether those subsequent payments into the current account also operated to discharge the indebtedness on the loan account, it being argued on behalf of the defendants that the two accounts were one, and that the debits on the loan account were to be treated as wiped out by the subsequent credits to the current account. Pickford LJ said ([1918] 2 KB at 839):

“It was argued that this amount must also be held satisfied by subsequent payments into the current account exceeding the sum of 3400l., the ground of this argument being that the two accounts must be considered as one. I think there is no foundation for this argument. The facts clearly show that the accounts were to be kept distinct by arrangement between the plaintiffs and the company. If it were otherwise, the company would be extremely hampered in their business, for they could never safely draw on the current account so long as the credit balance did not exceed the amount due on the loan account. The effect of this arrangement is that payments to the credit of the current account are appropriated to that account and cannot be taken in reduction of the loan account.’

Bankes LJ said ([1918] 2 KB at 843):

‘It is, I think, clear that by arrangement between the bank, the company,

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and the guarantors the two accounts were kept, and were intended to be kept, quite distinct, and that moneys paid into either the one or the other account by the company, or on their behalf, could only be applied by the bank in the manner in which it was directed to apply them. Under these circumstances the surety cannot, in my opinion, contend that, as between himself and the bank, the latter ought to have applied moneys in discharge, or part discharge, of an account to which the bank had no right to apply such moneys.’

Scrutton LJ said ([1918] 2 KB at 847):

‘The first point argued appears to involve a misunderstanding of the relation of loan and current accounts. The sums paid into the current account are appropriated by the customer to that account, and cannot be used by the bank in discharge of the loan account without the consent of the customer. No customer could otherwise have any security in drawing a cheque on his current account if he had a loan account greater than his credit balance on current account. The 3400l. debit balance on loan account cannot be treated as discharged by subsequent payments into the current account.’

These are clear, unequivocal and unqualified statements of the law which, if read literally (especially the passage which I have just quoted from the judgment of Scrutton LJ) and as of universal application, appear amply to justify the main argument of counsel for the plaintiffs.

The second case is W P Greenhalgh & Sons v Union Bank of Manchester Ltd, a case tried by Swift J at Manchester Assizes. The facts do not matter for present purposes since neither counsel sought to contend that the actual decision in the case was wrong. The controversy arises by reason of a passage in the judgment ([1924] 2 KB at 164, [1924] All ER Rep at 343). This passage (as is made plain by a previous passage ([1924] 2 KB at 163, 164, [1924] All ER Rep at 343)) was obiter. It has never, so far as I am aware, either been judicially criticised or judicially approved in later cases. But it has been the subject of somewhat adverse comment in certain textbooks, notably Paget on Bankingc. The passage requires quoting in full ([1924] 2 KB at 164, [1924] All ER Rep at 343, 344):

‘Mr Laski contended, in substance, that the relation of banker and customer entitled the banker to deal with both accounts as being one whole and entirely under his control, he alleging that he had a lien over all assets, so that he might remove assets from the one account to meet deficiencies in the other. I cannot accept this proposition. If a banker agrees with his customer to open two or more accounts, he has not, in my opinion, without the assent of the customer, any right to move either assets or liabilities from the one account to the other; the very basis of his agreement with his customer is that the two accounts shall be kept separate, and if the customer pays bills drawn upon him not into his general account, where they will be discounted and he will receive the benefit of being able to draw against them, but into an account in which they will only be used either to pay bills accepted by the bank or bills drawn by the customer which they are specifically to meet, I do not think a banker, any more than any other individual, can change them from the one account into the other without the customer’s assent. On this point it seems to me that the only question to be decided is, what is the agreement between the banker and the customer? and if that agreement is, as I find it to be in this case, that there shall be a general account into which bills are paid as cash and that there shall be an account into

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which bills shall be paid for some other purpose, bills or their proceeds cannot be moved from one account to the other at the whim of the banker without the consent, express or implied, of the customer.’

It is to be observed that in an earlier passage in the judgment ([1924] 2 KB at 161, [1924] All ER Rep at 342), the learned judge said that many cases and some textbooks were cited to him but that he found it unnecessary to review the authorities. The report unfortunately does not show what those cases were, nor whether any authorities were cited justifying the full breadth of the proposition which he enunciated.

The third case relied on was Re EJ Morel (1934) Ltd, to which I have already referred. Buckley J, after quoting from the judgment of Scrutton LJ in Bradford Old Bank Ltd v Sutcliffe ([1918] 2 KB at 847), said, on the authority of that case ([1961] 1 All ER at 803, [1962] Ch at 31, 32):

‘In my judgment that case demonstrates that there is an important difference between a case where a customer has several current accounts, and a case where a customer has an account which is not a current account, and one or more current accounts in the bank. In the first case where all the accounts are current, the banker can combine those accounts in whatever way he chooses, treating them all as being one account of his relationship with his customer. In the other case the accounts are of a different character, and the banker is not free to combine them in that way.’

Basing himself on these three authorities, counsel for the plaintiffs argued that there was no right of set-off unless the bank had brought the 4 April arrangement to an end before the resolution to wind up was passed on 12 June 1968. This he said they never did, with the consequence that the credit balance on the no 2 account was available for the general body of creditors, and not for setting-off against the debit balance on the no 1 account.

Counsel for the bank in reply to the argument based on these authorities was able to cite at least as many others which seemed to shed doubt on the full breadth of the propositions enunciated in those cases. He cited first ReEuropean Bank, Agra Bank Claim. The material facts were that the Oriental Bank had three accounts with Agra Bank, a loan account, a discount account and a general account. Oriental frequently applied to Agra for large accommodation loans which were entered on the loan account, and securities were deposited to meet those loans. Oriental, having drawn on Agra for a further £10,500, deposited as collateral certain bills including three bills drawn on European. Agra accepted the drafts to the extent of £10,500, paid on the acceptances and carried the amount to the loan account. All three banks went into voluntary liquidation, with Agra heavily indebted to Oriental on all three accounts, but by reason of the realisation of certain securities the balance on the loan account was covered, leaving a deficit on the general account. Agra then claimed a lien on the bills deposited to cover the £10,500 for the deficiency on the general account. Sir Richard Malins V-C upheld the claim as did the Court of Appeal not withstanding that there was no evidence that the bills were intended to be or treated as applicable to any debit balance save that due on the loan account. James LJ giving judgment said ((1872) 8 Ch App at 44):

‘In truth, as between bankers and customer, whatever number of accounts are kept in the books, the whole is really but one account, and it is not open to the customer, in the absence of some special contract, to say that the securities which he deposits are only applicable to one account.’

Mellish LJ agreed.

Here, therefore, is a decision of the Court of Appeal treating three different accounts,

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a loan account, a discount account and a general account as one account, and securities, apparently pledged to cover only indebtedness on one account, as available to discharge indebtedness on another account of a different character. Furthermore, the judgment of James LJ, agreed to by Mellish LJ, is based not on the facts of the particular case but on the general principle that whatever number of accounts are kept they are but one account and that in the absence of a special contract the securities applicable to one account are applicable to all the accounts. This decision does not appear to have been cited in the Court of Appeal in Bradford Old Bank Ltd v Sutcliffe, nor (so far as the report goes) to Swift J in W P Greenhalgh v Union Bank of Manchester Ltd.

Counsel for the bank next relied on a case also decided in 1872, Garnett v McKewan. The plaintiff had an account at two different branches of the defendant bank. One account was overdrawn. He had another account which was in credit. He then drew three cheques to a total amount which was less than the credit balance but more than the net balance after setting-off the credit balance on the one account against the debit balance on the other. The bank dishonoured the cheques. The plaintiff brought an action which failed. Kelly CB said ((1872) LR 8 Exch at 13, cf [1861–73] All ER Rep at 688):

‘It must be remembered, however, that the plaintiff might have ordered a transfer of his assets from the one branch to the other, and the defendants’ bank, on the other hand, must have a corresponding right. In general it might be proper or considerate to give a notice to that effect, but there is no legal obligation on the bankers to do so, arising either from express contract or the course of dealing between the parties.’

Pigott B said ((1872) LR 8 Exch at 14, cf [1861–73] All ER Rep at 690):

‘Where there are branch banks the same relation between banker and customer exists, in the absence of any special contract, as in the case where there is one establishment only. There is no duty on the part of the bank to keep the accounts separate. No one would say that a banker might set off against his customer’s account a debt due to him from his customer in another capacity, a private debt, for example, or a debt due to him as carrying on some distinct business. Nor has a banker any right to confound two accounts lodged with him by one person in two different capacities. He would have no right to blend a personal and a trust account. But here there is nothing to prevent the banker from taking into account the state of the plaintiff’s balance as a whole; and upon such account being taken, it appeared that the plaintiff had no sufficient assets to meet the cheques presented.’

Bramwell B said ((1872) LR 8 Exch at 14, 15, cf [1861–73] All ER Rep at 690, 691):

‘It is admitted that in some cases the bank could not debit the customer with a debt due to them; for example, a debt due to the bank as carrying on a different business, as that of brewers. Nor, again, would they have any right to blend two accounts kept by one person with them in different characters, as a personal and a trust account. But here there was nothing except the fact that there were two branch establishments. Nothing was said as to their being separate, and nothing should be implied. If indeed it was understood and agreed that the branches should be kept separate, then the plaintiff is right, but not otherwise.’

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Later Bramwell B said ((1872) LR 8 Exch at 15, cf [1861–73] All ER Rep at 691):

I think, therefore, that the customer has no claim, for he is indebted to the bank on his whole account in such an amount as to reduce his assets to almost nothing. There is no duty, in my opinion, apart from usage or contract, on the part of the banker to honour cheques at one branch because the customer has a credit account there, if at another branch there is a countervailing debit.’

It is to observed, as Buckley J pointed out in his judgment in Re E J Morel (1934) Ltd ([1961] 1 All ER at 802, [1926] Ch at 30) that in that case both the accounts were current accounts albeit at different branches of the same bank.

The next case in chronological sequence on which counsel for the bank relied is T & H Greenwood Teale v William Williams, Brown & Co, a case not fully reported under this reference and apparently neither reported elsewhere nor referred to in any of the standard textbooks. The plaintiffs were a firm of solicitors who had a credit balance on their office account (which credit balance would appear to have derived from improper transfers to that account from their clients’ account) and a debit balance on their private account exceeding the credit balance on the office account. The defendant bank claimed to set-off that credit balance against that debit balance. Wright J in giving judgment is reported to have said ((1894) 11 TLR at 57):

‘… as he understood the law, a banker with whom a customer opened several accounts had a lien upon all the accounts except (1) where there was a special agreement; (2) where specific property of a third person had been paid to the bank; (3) where the bankers had notice that when a customer drew upon a particular account it would be fraud or breach of trust. In this case there was no special agreement … The bank, in claiming a lien upon the office account, were treating Mr Teale as having a right to charge that account. There must, therefore, be judgment for the defendants, with costs.’

Counsel for the bank next relied on another decision of the Court of Appeal, Mutton v Peat. In this case a firm of stockbrokers had two accounts with their bankers, a current account and a loan account. On their default their current account was in credit but the loan account (to secure which and also their general indebtedness they had deposited securities belonging to their clients) was heavily in debit. The bank was unaware of the true ownership of the securities which it realised. The proceeds were more than sufficient to cover the deficit on the loan account. A dispute arose whether the bank must first apply the credit balance on the current account to reduce the indebtedness on the loan account and only thereafter apply the proceeds of the securities to satisfy the differences between those two balances. The Court of Appeal held that the two accounts must be treated as one and that accordingly it was the duty of the bank first to apply the credit balance on the current account to reduce the indebtedness on the loan account before applying the proceeds of the sale of the securities to reduce the indebtedness on the latter account. Sir Nathaniel Lindley MR said ([1900] 2 Ch at 85):

‘The important thing, and, to my mind, the key to the case, is this, that there was no

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agreement, at the time when the bonds were deposited, that the two accounts—the loan account and the current account—should be kept separate, so that the indebtedness for which the bonds were deposited should be ascertained by looking at the loan account alone. In other words, there was no agreement to the effect that the deposited bonds should be a security for anything except that which, on taking an account between Tatham & Co. [they were the stockbrokers] and the bankers, under all heads of account between them, should ultimately be found due from Tatham & Co. to the bankers.’

Rigby and Collins LJJ agreed.

Finally counsel for the bank on this branch of his argument relied on a recent decision of Ungoed-Thomas J in Re Keever (a bankrupt), ex parte The Trustee of the Property of the Bankrupt v Midland Bank Ltd. Once again the facts are complicated. The bankrupt had three accounts with the defendant bank, a private account, a loan account and a ‘George and Dragon’ account, the last of which related to a restaurant of that name which was conducted by the bankrupt. An act of bankruptcy was committed on 5 October 1962. On 14 November 1962, the restaurant was sold and a cheque was drawn in favour of the bankrupt for £3,000. On that date the private account was in debit, the loan account was in debit but the ‘George and Dragon’ account was in credit. On 15 November 1962, the bank received the cheque for £3,000 and credited it to the private account, receiving the actual proceeds of the cheque on 16 November. The trustee in bankruptcy claimed the proceeds of the cheque for £3,000. The bank claimed that by reason of its lien it was entitled to set-off against the £3,000 (or more accurately so much of that sum as remained after a further cheque had been drawn on and paid from the private account) the debit balances on the private and loan accounts. The bank in that case succeeded. In this case counsel for the bank adopted, as part of his argument, the argument of counsel for the defendant bank in that case as reported ([1967] Ch at 188):

‘The bank has never suggested it was entitled to combine a loan account with a current account whenever it liked: such a course has to be with the customer’s consent otherwise the purpose of making a loan would be avoided; but on a bankruptcy or liquidation there must be combination.’

In giving judgment Ungoed-Thomas J said ([1966] 3 All ER at 633, 634, [1967] Ch at 189, 190):

‘It is established law that a banker has a lien for his general balance on securities deposited with him (Brandao v. Barnett [(1846) 12 Cl & Fin 787 at 810, [[1843–60] All ER Rep 719 at 724] per LORD LYNDHURST). A cheque can be the proper subject of such a lien (Great Western Ry. Co. v. The London and County Banking Co., Ltd. [[1900] 2 QB 464 at 475, 476 per ROMER, L.J., in a judgment reversed in the House of Lords [[1901] AC 414, [1900–03] All ER Rep 1004] without affecting the validity of the passage referred to). Such a lien “is not merely over the paper on which the order to pay is written but over the chose in action” (Sutters v. Briggs [[1922] 1 AC 1 at 20 per LORD SUMNER). The lien is “to the extent of the overdraft” (Midland Bank, Ltd v. Reckitt [[1933] AC 1 at 18, 19, [1932] All ER Rep 90 at 96], per LORD ATKIN). It may be in respect of an overdraft not yet due for payment but constituting a contingent liability (Bolland v. Bygrave). And the lien is applicable in respect of the balance on all accounts between the bank and the customer, including a loan account (Re European Bank, Agra Bank Claim).’

It is right to point out that counsel for the plaintiff trustee in bankruptcy never argued in that case that in no circumstances could there be a right of set-off of the credit balance

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on the private account against the debit balances on the loan and ‘George and Dragon’ accounts. It seems from the report that none of the cases relied on by counsel for the plaintiffs before me was cited to the learned judge except Re EJ Morel (1934) Ltd ([1961] 1 All ER 796, [1962] Ch 21; see [1967] Ch at 188). On the other hand, as I have already pointed out, Bradford Old Bank Ltd v Sutcliffe was referred to by Buckley J in giving judgment in this last-mentioned case, and accordingly Ungoed-Thomas J must have had that decision of the Court of Appeal in mind. Furthermore, the learned judge had been leading counsel for the liquidator in Re EJ Morel (1934) Ltd.

I have set out the principal authorities cited to me on either side on this branch of the case at some length because some of the statements of the law contained in them are not, as counsel agreed, easily susceptible of reconciliation. It is a curious fact that the nineteenth century cases appear to support the argument of counsel for the bank while the cases in the first half of the twentieth century before Re Keever appear to support counsel for the plaintiffs. In these circumstances I was invited by counsel to approach the problem as one of principle and to examine other cases in historical sequence in order to seek to discover what the true principle was underlying a banker’s so-called right of set-off.

The earliest case to which counsel could refer me was Giles v Perkins. The facts are not of importance. What is important is the statement of the law by Lord Ellenborough CJ that ((1807) 9 East at 14):

‘If the banker discount the bill or advance money upon the credit of it, that alters the case; he then acquires the entire property in it, or has a lien on it pro tanto for his advance.’

In Bolland v Bygrave ((1825) Ry & M at 14) Lord Abbott CJ said:

‘… I think that a banker, who stands in this relation to a customer, has a lien upon any securities of that customer, which may, for any purposes, be placed in his hands; and he has a right to retain them to countervail the liabilities he has so incurred on his behalf, till those liabilities have ceased.’

In Brandao v Barnett a decision of the House of Lords (it will be recalled that this case was referred to by Ungoed-Thomas J in Re Keever), the House decided that on the facts found the bankers concerned had no lien, but Lord Campbell, who delivered the first speech, stated categorically ((1846) 3 CB at 530, [1843–60] All ER Rep at 722) that the House was entitled to take judicial notice of the general lien of the law merchant. Lord Campbell ((1846) 3 CB at 531, [1843–60] All ER Rep at 722) said:

‘Bankers, most undoubtedly, have a general lien on all securities deposited with them, as bankers, by a customer, unless there be an express contract, or circumstances that shew an implied contract, inconsistent with lien.’

He quoted an earlier decision (Ie Davis v Bowsher (1794) 5 Term Rep 488 at 491) of Lord Kenyon where that learned judge had said:

‘Bankers have a general lien on all securities in their hands for their general balance, unless there be evidence to shew that any particular security was received under special circumstances which would take it out of the common rule.’

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Lord Lyndhurst LC, concurring, said ((1846) 3 CB at 535, [1843–60] All ER Rep at 724):

‘I think there is no question, that, by the law-merchant, a banker has a lien upon securities deposited with him for his general balance. I consider this as part of the established law of the country … ’

The existence of a banker’s lien and of the banker’s rights deriving therefrom was again emphasised by the House of Lords in Misa v Currie. Lord Hatherley spoke of ((1876) 1 App Cas at 567, [1874–80] All ER Rep at 692):

‘… the lien which bankers have upon all documents which are placed in their hands, by customers who are indebted to them, in the course of their banking transactions … ’

Lord O’Hagan mentioned the banker’s lien in similar language ((1876) 1 App Cas at 573, [1874–80] All ER Rep at 692).

It is plain from these general statements of the law that Wright J was well justified in saying in the Greenwood Teale case in 1894 that where a customer had several accounts with a banker, the banker (subject to the exceptions mentioned) had a lien on all those accounts. It must be remembered when considering these many cases in historical sequence that the banker/customer relationship (as it now exists) evolved gradually during the second half of the nineteenth century and that the law correspondingly developed to keep pace with the changes in banking practice. The true nature in law of the ordinary banker/customer relationship was not finally and authoritatively defined until the decision of the Court of Appeal in N Joachimson (a firm name) v Swiss Bank Corpn—see the judgment of Atkin LJ in that case ([1921] 3 KB at 127–131, [1921] All ER Rep at 100–102).

As Ungoed-Thomas J recalled in Re Keever ([1966] 3 All ER at 634, [1967] Ch at 189), Lord Sumner in Sutters v Briggs ([1922] 1 AC at 20) said:

‘… a banker’s lien is not merely over the paper on which the order to pay is written but over the chose in action … ’

It is plain from the context of the passage in Lord Sumner’s speech from which I have quoted only part of a single sentence that Lord Sumner regarded the proposition as axiomatic and beyond the possibility of argument to the contrary.

Further in Midland Bank Ltd v Reckitt where the appellant bank claimed a lien on certain cheques to the extent of an overdraft existing when those cheques were paid in, Lord Atkin (although rejecting the bank’s claim for other reasons) said ([1933] AC at 19, [1932] All ER Rep at 96) that the banker’s lien, had it existed, would have been ‘to the extent of the overdraft’.

I have now completed the review of the most relevant authorities cited to me. In my judgment analysis of them justifies the primary submission of counsel for the bank that what is sometimes called the right of set-off and sometimes the right of combination or of consolidation of accounts is but the manifestation of or a right analogous to the exercise of the banker’s right of lien, a right which is of general application and not in principle (apart from special agreement whether express or implied) limited to current or other similar accounts.

Counsel for the plaintiffs at one time in his argument laid some stress on the fact that there had been on the facts of this case no physical combination or consolidation of the no 1 account and the no 2 account at any time after 12 June 1968.

Page 48 of [1970] 1 All ER 33

That this is so is correct. But the evidence of the bank’s witnesses (which I accept) was that it was not the practice of the bank to make any such physical combination or consolidation of two accounts at least until the matter had been finally disposed of. Counsel for the plaintiff informed me during the argument (although no evidence was called on this point) that other banks follow a different practice. Be this as it may, I cannot think that the mechanics by which a bank seeks to exercise its right of lien are relevant, unless, of course, the bank by its action precludes itself from thereafter asserting that right. In the present case the bank acted promptly to assert its right vis-à-vis the liquidator. If it possessed that right, that right was asserted properly and timeously; if it did not possess that right, then it had no right to assert. But the existence or absence of the right cannot, in a case such as the present, in my judgment turn on the actual form in which the entries in the bank’s books were made or on the absence from those books of any physical consolidation or combination. If, therefore, in the present case the bank possessed the right of lien and was otherwise entitled to exercise it, there is nothing in the manner in which the bank maintained the relevant entries in its books to abrogate that right.

When then does a banker possess this right? On the authorities it appears to me that the right of lien arises whenever a customer is indebted to a banker as a banker on the customer’s general balance of account and that the lien continues so long as the customer remains so indebted. But the right to exercise the lien can and no doubt often is modified or excluded by special contract, express or implied. There are several examples of such modification or exclusion in the cases to which I have referred. One is in Brandao v Barnett. Another (as I think) is in Bradford Old Bank Ltd v Sutcliffe. Yet another is in W P Greenhalgh & Sons v Union Bank of Manchester Ltd. If, for example (as is frequently the case), a banker permits a customer to have a loan account and also a trading account which is a current account, the former ex hypothesi overdrawn, the latter assumedly in credit and no other relevant terms are agreed, the arrangement will not work if at any moment the bank is free to exercise their right of lien over the latter account. I would respectfully adopt what Scrutton LJ said in Bradford Old Bank Ltd v Sutcliffe ([1918] 2 KB at 847) that:

‘No customer could otherwise have any security in drawing a cheque on his current account if he had a loan account greater than his credit balance on current account.’

If such an arrangement as I have envisaged is made between a customer and a banker in respect of a loan account and a trading account which is a current account, it seems clear that, even if there is no express agreement abrogating the right of lien so long as the arrangement subsists, it must of necessity in the ordinary case be an implied term of the arrangement that the right of lien will not be enforced so long as the arrangement subsists. Without such implication, as Scrutton LJ pointed out, the arrangement will not work for the very reason given by the learned Lord Justice.

In my judgment the difficulties which otherwise arise of reconciling cases such as Re European Bank and Mutton v Peat on the one hand and Bradford Old Bank Ltd v Sutcliffe and W P Greenhalgh v Union Bank of Manchester Ltd on the other, disappear if in each case the question is asked, ‘What was the contract between the banker and the customer?' This was the question asked by Sir Nathaniel Lindley MR in Mutton v Peat ([1900] 2 Ch at 85), and again by Swift J in W P Greenhalgh v Union Bank of Manchester Ltd ([1924] 2 KB at 164, [1924] All ER Rep at 343). Where I most respectfully differ from Swift J is in the statement (admittedly obiter as I have already pointed out) that:

Page 49 of [1970] 1 All ER 33

‘If a banker agrees with his customer to open two or more accounts, he has not, in my opinion, without the assent of the customer, any right to move either assets or liabilities from the one account to the other; the very basis of his agreement with his customer is that the two accounts shall be kept separate … ’

This statement taken by itself is, in the light of the earlier cases, too wide. The true view, as I think, is that if a banker agrees with his customer to open two or more accounts, the banker has, by virtue of his lien, the right to move either assets or liabilities from one account to the other without the customer’s consent, unless the banker has expressly or impliedly agreed with his customer that he will not do so; such agreement may be for a limited period or it may be indefinite in the duration or it may be only for such period as the banker/customer relationship subsists. The number of possible variations between one agreement and another is large. The question to be asked in every case is, ‘what was the agreement?’ and the ascertainment of the answer will involve also answering the question ‘what was the duration of the agreement?’

It follows from what I have already said that if a banker seeks to enforce his right of lien he must be sure that by so doing he is not acting in breach of his agreement with his customer. It seems plain on the authorities that the right of lien is exercisable over all securities of any kind which come into the possession of the banker as banker (although not in any other capacity) and that securities include cheques and their proceeds. That right of lien (or an analogous right derived from that right of lien—it matters not which) exists and extends to cover a banker’s own indebtedness to his customer when the customer is also indebted to the banker on another account or other accounts. This may seem an unusual application of the concept of lien but it is an application well established and justified by the authorities to which I have referred. But just as securities (including cheques and their proceeds) must come into the possession of the banker as banker so they must belong to the customer in the same right as that in which the customer has incurred his indebtedness to the banker. As the cases show, securities belonging to the customer as (for example) a trustee or a partner cannot be the subject of the banker’s lien in respect of indebtedness incurred by the customer in his personal capacity. Similar considerations apply equally to the setting-off of credit and debit balances against one another.

The application of these principles as I have endeavoured to state them causes no difficulty where the customer has two current accounts in his own name as in Garnett v McKewan. In such a case there is a clear right of lien on any credit balance which a banker may enforce to offset any debit balance. But what of the position where a customer has a loan account on (say) seven days’ call and a current account which is in credit? Plainly in such a case there is no right of lien on the balance on the current account exercisable at the will of the banker. If, however, the call is made and the loan still remains unpaid the position in my view becomes indistinguishable from that of an overdrawn current account. It seems logically absurd that in such circumstances the banker cannot set-off against that overdrawn loan account a credit balance on a current account with the same customer merely because the account was originally designated a loan account. The critical question must always be, ‘what was the contract?’ and not whether a particular account or accounts bear one title rather than another.

Let me take another example. Suppose a current account is overdrawn but there is a balance on a deposit account on (say) one month’s notice. There would, I apprehend, be no right of lien on the balance on the deposit account to set it off against the debit balance on the current account exercisable at the will of the banker, for it must be an implied, if not an express term of the contract that the balance on the deposit account will earn interest until the expiry of the month’s notice. But if the

Page 50 of [1970] 1 All ER 33

customer gives a month’s notice and requires the balance transferred at the expiry of the month, I can see no reason in either law or in logic why the banker cannot on the expiry of the month claim to exercise his lien on the balance on the deposit account, or so much of it as may be required for the purpose, in order to offset the debit balance on the current account.

If the basic principles be as I have endeavoured to state them, counsel for the plaintiffs’ main argument does not derive the unqualified support which he sought to derive from cases such as Bradford Old Bank Ltd v Sutcliffe. The passages which I have quoted from the judgments of the three learned Lords Justices in that case were, of course, directed to the complex facts concerned. The banker/customer relationship between the company and the bank there continued so long as the bank allowed the company to maintain both the loan account and the current account. For the very reasons which all the learned Lords Justices gave, so long as that position was maintained, the two accounts could not be treated as one and accordingly the payments into the current account did not operate to discharge the liability on the loan account. As Pickford LJ said ([1918] 2 KB at 839): ‘… the accounts were to be kept distinct by arrangement between the plaintiffs and the company’. That was the arrangement in that case and that concluded the matter. Conversely there was no such comparable arrangement in Re European Bank or in Mutton v Peat as the learned judges respectively concerned with those two cases pointed out.

In the majority of cases where the customer maintains a loan account in debit and a current account in credit the same result must follow as was reached in Bradford Old Bank Ltd v Sutcliffe since any other conclusion would defeat the whole purpose of maintaining the two accounts. In principle, however, I can see no reason why a banker should not insist, if he wishes and can persuade his customer to accept his terms, that he shall be free at any moment to set-off the credit balance on the current account against the debit balance on the loan account, however disadvantageous to the customer this course of dealing might be.

The next question, in a case where by reason of the nature and terms of his contract with his customer the banker is, for the reasons which I have given, unable to exercise his right of lien at will, is ‘for how long does the banker remain subject to this disability?’ Counsel for the plaintiffs argued that once the right to exercise the lien has been abrogated by reason of the nature and terms of the contract, nothing (short of express agreement) can restore this right to the banker. If, as in the present case, winding-up ensued, then the banker must in the winding-up suffer the consequences of the contract which he had previously made with his customer. His right of lien could never again be exercised and if there were one credit balance and one debit balance at the time of the resolution to wind up, the former was available for the general body of creditors, while for the latter the banker was in no preferential position but must prove in the winding-up as an ordinary unsecured creditor. Counsel for the bank on the other hand argued that the banker’s inability to exercise his lien continued only so long as the banker/customer relationship continued. Once this ceased, he contended, the banker’s right of lien once again became fully exercisable. The banker/customer relationship could be determined in a number of ways apart from by express agreement. He instanced death, insanity, bankruptcy as well as winding-up, as some of the ways in which the relationship might determine. He argued that it would be a strange result if, when a customer died insolvent and heavily indebted on an overdrawn loan account but with a credit balance on his current account, his executors could say to the banker ‘you must pay us the credit balance but you must prove against the estate for the overdraft’. By parity of reasoning, counsel argued, it would be equally strange if where bankruptcy or liquidation supervened in similar circumstances the trustee in bankruptcy or the liquidator could advance a similar contention with success.

Page 51 of [1970] 1 All ER 33

It is axiomatic that once death or insanity occurs the banker/customer relationship determines. No cheques can validly be drawn on a customer’s current account however much in credit it may be once the banker is aware of the customer’s death or insanity. The same position arises once the banker becomes aware of the customer’s becoming bankrupt or passing a resolution to wind up or of the presentation of a petition to wind up. The point is well illustrated in the present case by a memorandum of the bank dated 17 June 1968 which, so far as material, reads:

‘I told Mr Harris that late on Friday afternoon because we telephoned Bernard Philip [sic] and Co., in London we learnt that a resolution was passed at the meeting on 12th instant. Therefore our only alternative was to stop the no 2 account immediately … ’

Counsel for the plaintiffs was, I think, ultimately constrained to admit that he could not maintain this part of his argument without contending that Re Keever was wrongly decided. It seems to me clear that Ungoed-Thomas J’s judgment involves acceptance of the view that, whatever the position regarding the banker’s lien might have been before the bankruptcy in that case, on and after bankruptcy the lien became properly exercisable by the bank there concerned. I have already mentioned that the argument submitted to me by counsel for the plaintiffs was never submitted to Ungoed-Thomas J but I read the learned judge’s judgment as implicitly accepting the submission of counsel for the bank in that case to which I have already referred ([1967] Ch at 188).

Counsel for the bank in the present case, on the other hand, agreed that part of the decision in Re E J Morel (1934) Ltd put difficulties in his way on this part of his argument. He sought, however, to argue that a comparable question of set-off or combination of accounts did not arise in that case because, since Buckley J held that the no 2 account, which was in credit, and the no 3 account, which was in debit, must be treated as one account notwithstanding that they were in form separate accounts, the result of treating them as one account was to produce a net debit balance on the two combined accounts. As there was also a debit balance on the no 1 account, he contended that there was nothing with which the debit balance on the combined no 2 and no 3 accounts could be further combined so as to reduce the overall indebtedness to the bank. He produced a useful table showing details of the figures involved and of the rival claims, which for ease of reference I append to this judgment (Analysis of E J Morel (1934) Ltd).

Accounts

       No 1                No 2                No 3                Overall        

       —                +                —                —        

       1,839                1,292                1,371                1,917        

               or        1,544                1,623                        

       1,839                1,544                                        

Bank’s claim:        294                        1,623                        

1,917of which £910 preferential

       1,839                1,292                1,371                1,917        

£78 19s all preferential

Liquidator:        294                        1,623                        

               1,918                                        

Page 52 of [1970] 1 All ER 33

Unfortunately I do not think that this escape route is open either to counsel for the bank or for me, for the bank had primarily argued before Buckley J that it was entitled to combine the credit balance on the no2 account with the debit balance on the no 1 account so as to reduce the net indebtedness on the latter account, and Buckley J expressly rejected this argument for the reasons which I have already quoted. Buckley J did not have the benefit of the argument to which I have listened from counsel for the bank as to the effect of bankruptcy or liquidation on a banker’s right of lien. As appears from the passage in his judgment which I have quoted he treated the fact that the no 1 account was or partook of the character of a loan account as conclusive against the bank’s contentions regarding the combination of no 1 and no 2 accounts in that case. In this respect he clearly accepted the argument of counsel for the liquidator. Buckley J’s decision in Re EJ Morel (1934) Ltd that on the liquidation the combination of no 1 and no 2 accounts could not be permitted seems to me just as inconsistent with this part of the argument of counsel for the bank as Ungoed-Thomas J’s decision in Re Keever that on the bankruptcy the combination between the three accounts could be permitted is inconsistent with this part of the argument of the plaintiff’s counsel. I find myself, therefore, reluctantly and respectfully compelled to say that on this point one or other of the decisions is wrong. In my judgment, the decision of Ungoed-Thomas J was correct. I can see no logic in the view that a restriction on the exercise of a banker’s right of lien which arises by virtue of the terms of the contract made between the banker and the customer when the banker/customer relationship exists must continue to bind the banker once that relationship has been determined by death, insanity, liquidation or bankruptcy or for any other reason. So to hold involves that whenever a bank enters into a normal type of banking transaction, namely advancing money on overdraft and debiting that overdraft to a loan account while at the same time requiring the customer to maintain a credit balance on his current account, the bank (in the absence of express agreement, is at peril in the very event in which it will need protection. Not only does logic not suggest that this is a right conclusion, but I can find no binding authority which compels me to reach such a conclusion.

It remains, therefore, to apply the principles which I have endeavoured to state to the facts of this case. It was argued that because the bank in the letter of 17 April 1968 undertook to adhere to the proposal to which I have already referred for four months in the absence of materially changed circumstances, the bank thereby abrogated its right of lien for all time and possessed no such right at the time when the resolution to wind up was subsequently passed. For the reasons which I have given, I think that that right, although abrogated so long as the banker/customer relationship continued between the plaintiffs and the bank, became enforceable as soon as that relationship determined as it did on 12 June by reason of the resolution to wind up. At that moment the Girling cheque had already passed into the possession of the bank and, on the resolution to wind up, the bank’s right of lien extended to that cheque and subsequently to its proceeds as well as to the whole balance on the no 2 account. Accordingly, in my judgment the bank was entitled to do that which it claimed to be entitled to do on 19 June, that is to say to set off against the debit balance on no 1 account the whole credit balance on the no 2 account. For those reasons, the action fails, and there will be judgment for the bank.

Judgment for the defendant bank.

Solicitors: Landau & Co (for the plaintiffs); Waltons, Bright & Co (for the bank).

K Diana Phillips   Barrister.

Bushell v Faith

[1970] 1 All ER 53

Categories:        COMPANY; Incorporation; Directors        

Court:        HOUSE OF LORDS        

Lord(s):        LORD REID, LORD MORRIS OF BORTH-Y-GEST, LORD GUEST, LORD UPJOHN AND LORD DONOVAN        

Hearing Date(s):        10, 11 NOVEMBER, 16 DECEMBER 1969        

Company – Articles of association – Directors – Article providing director with special voting rights on resolution to remove him from office – Validity – Companies Act 1948, s 184(1).

The articles of association of a company incorporated Table A excluding art 96 (empowering a company to remove a director by ordinary resolution). They included a special article: ‘In the event of a Resolution being proposed at any General Meeting of the Company for the removal from office of any Director, any shares held by that Director shall on a poll in respect of such Resolution carry the right to three votes per share … ’

Held – (Lord Morris of Borth-y-Gest dissenting) The special article effectively gave a director on the occasion of a poll on a resolution for his removal from office three votes for every share which he held notwithstanding s 184(1)a of the Companies Act 1948(see h below, p 54 h, p 56 j, to p 57 b, and p 58 b and c, post).

Decision of the Court of Appeal [1969] 1 All ER 1002 affirmed.

Notes

For the removal of a company director from office, see 6 Halsbury’s Laws (3rd Edn) 323, 324, para 637.

For the Companies Act 1948, s 184, see 5 Halsbury’s Statutes (3rd Edn) 255.

Appeal

This was an appeal by Constance Anna Bushell from the order of the Court of Appeal (Harman, Russell and Karminski, LJJ) dated 21 February 1969 and reported [1969] 1 All ER 1002, allowing the appeal by the respondent, Geoffrey Leopold Faith, against the injunction made by Ungoed-Thomas J on 3 December 1968, restraining the respondent from acting or purporting to act as a director of Bush Court (Southgate) Ltd  The facts are set out in the opinion of Lord Upjohn.

G B H Dillon QC and D J Nicholls for the appellant.

M M Wheeler QC and G T Hesketh for the respondent.

Their Lordships took time for consideration

16 December 1969. The following opinions were delivered.

LORD REID: My Lords, with some reluctance I agree with the majority of your Lordships that this appeal must be dismissed. Special art 9 of the articles of association of this company is obviously designed to evade s 184(1) of the Companies Act 1948, which provides that a company may by ordinary resolution remove a director notwithstanding anything in its articles. The extra voting power given by that article to a director whose removal from office is proposed makes it impossible in the circumstances of this case for any resolution for the removal of any director to be passed if that director votes against it.

We were informed that this device for giving extra votes to a particular share or a particular shareholder did not appear in any textbook or any reported case until

Page 54 of [1970] 1 All ER 53

1956. In Palmer’s Company Precedentsb published in that year, form no 256 (c) in effect would give to the named shareholder power to prevent any alteration of the particular article, thereby preventing the application of s 10 of the Act, and form no 259 is similar to special art 9 in the present case. Form no 254 confers on the holder of a particular share what is in effect a veto by which he can prevent any resolution of any kind from being passed without his consent.

But the practice of giving special voting rights or special lack of voting rights to a particular class of shares is old and is recognised in art 2 of Table A in Sch 1 to the 1948 Act. The novel use of this practice in the forms set out in Palmer may not have been contemplated in 1948, and it may be that the whole practice will be reviewed when amendments to the Companies Act 1948 are being proposed. But we must take the law as we find it.

Counsel for the appellant found it impossible to deny that an article like that in form no 254 would be effective to prevent the removal of a director without the consent of the shareholder having the veto thereby given to him, and I cannot find any sufficient reason for holding that a veto in that form would be effective but that what amounts to a veto in special art 9 in the present case is ineffective to prevent evasion of s 184.

LORD MORRIS OF BORTH-Y-GEST: My Lords, it is provided by s 184(1) of the Companies Act 1948 that a company may by ordinary resolution remove a director before the expiration of his period of office. The company may do so notwithstanding anything to the contrary in its articles. So if an article provided that a director was irremovable he could nevertheless be removed if an ordinary resolution to that effect was passed. So also if an article provided that a director could only be removed by a resolution carried by a majority greater than a simple majority he would nevertheless be removed if a resolution was passed by a simple majority.

Some shares may, however, carry greater voting power than others. On a resolution to remove a director shares will therefore carry the voting power that they possess. But this does not, in my view, warrant a device such as special art 9 introduces. Its unconcealed effect is to make a director irremovable. If the question is posed whether the shares of the respondent possess any added voting weight the answer must be that they possess none whatsoever beyond, if valid, an ad hoc weight for the special purpose of circumventing s 184. If special art 9 were writ large it would set out that a director is not to be removed against his will and that in order to achieve this and to thwart the express provision of s 184 the voting power of any director threatened with removal is to be deemed to be greater than it actually is. The learned judge thought that to sanction this would be to make a mockery of the law. I think so also.

I would allow the appeal.

LORD GUEST: My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Donovan, with which I agree.

I would dismiss the appeal.

LORD UPJOHN: My Lords, this appeal raises a question of some importance to those concerned with the niceties of company law, and the relevant facts, which are not in dispute, can be very shortly stated. The respondent company Bush Court (Southgate) Ltd (a formal party to the proceedings) was incorporated on 19 September 1960, and at all material times had an issued capital of 300 fully paid-up shares of £1 each held as to 100 shares each by a brother and his two sisters namely the appellant Mrs Bushell, the respondent Mr Faith and their sister Dr Kathleen Bayne.

Page 55 of [1970] 1 All ER 53

The respondent was a director but his conduct as such displeased his sisters who requisitioned a general meeting of the company which was held on 22 November 1968, when a resolution was proposed as an ordinary resolution to remove him from his office as director. On a show of hands the resolution was passed, as the sisters voted for the resolution; so the brother demanded a poll and the whole issue is how votes should be counted on the poll having regard to special art 9 of the company’s articles of association.

The company adopted Table A in Sch 1 to the Companies Act 1948, with variations which are immaterial for present purposes. The relevant articles of Table A are:

‘2. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share in the company may be issued with such preferred, deferred or other special rights or such restrictiOns, whether in regard to dividend, voting, return of capital or otherwise as the company may from time to time by ordinary resolution determine.

‘62. Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands every member present in person shall have one vote, and on a poll every member shall have one vote for each share of which he is the holder.’

Special art 9 is as follows:

‘In the event of a Resolution being proposed at any General Meeting of the Company for the removal from office of any Director, any shares held by that Director shall on a poll in respect of such Resolution carry the right to three votes per share and regulation 62 of Part 1 of Table A shall be construed accordingly.’

Article 96 of Table A, which empowers a company to remove a director by ordinary resolution is excluded by the articles of the company so that the appellant relies on the mandatory terms of s 184(1) of the Companies Act 1948, which so far as relevant is in these terms:

‘A company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its articles or in any agreement between it and him … ’

It is not in doubt that the requirements of sub-s (2) have been satisfied. So the whole question is whether special art 9 is valid and applicable, in which case the resolution was rejected by 300 votes to 200, or whether that article must be treated as overridden by s 184 and therefore void, in which case the resolution was passed by 200 votes to 100. So to test this matter the appellant began an action for a declaration that the respondent was removed from office as a director by the resolution of 22 November 1968, and moved the court for an interlocutory injunction restraining him from acting as a director. This motion comes by way of appeal before your Lordships.

The appellant argues that special art 9 is directed to frustrating the whole object and purpose of s 184 so that it can never operate where there is such a special article and the director in fact becomes irremovable. So she argues that, having regard to the clear words ‘notwithstanding anything in its articles’ in s 184, special art 9 must be rejected and treated as void. The learned judge, Ungoed Thomas J, so held. He said: ‘It would make a mockery of the law if the courts were to hold that in such a case a director was to be irremovable’, and later he concluded his judgment by saying: ‘A resolution under art 9 is therefore not in my view an ordinary resolution within s 184. The [appellant] succeeds in the application.’

The respondent appealed, and the Court of Appeal ([1969] 1 All ER 1002, [1969] 2 WLR 1067) (Harman, Russell and

Page 56 of [1970] 1 All ER 53

Karminski LJJ) allowed the appeal. Harman LJ ([1969] 1 All ER at 1004, [1969] 2 WLR at 1070) did so on the simple ground that the 1948 Act did not prevent certain shares or classes of shares having special voting rights attached to them and on certain occasions. He could find nothing in the 1948 Act which prohibited the giving of special voting rights to the shares of a director who finds his position attacked. Russell LJ ([1969] 1 All ER at 1005, [1969] 2 WLR at 1072) in his judgment gave substantially the same reasons for allowing the appeal and he supported his judgment by reference to a number of recent precedents particularly those to be found in Palmer’s Company Precedentsc but, with all respect to the learned Lord Justice, I do not think these precedents which, so far as relevant, are comparatively new can be said to have the settled assent and approbation of the profession, so as to render them any real guide for the purposes of a judgment; especially when I note the much more cautious approach by the learned editors of 5 Ency Forms & Precedents (4th Edn) 1966, p 428, where in reference to a form somewhat similar to special art 9 they state in footnote 14:

‘The validity of such a provision as this in relation to a resolution to remove a director from office remains to be tested in the courts.’

My Lords, when construing an Act of Parliament it is a canon of construction that its provisions must be construed in the light of the mischief which the Act was designed to meet. In this case the mischief was well known; it was a common practice, especially in the case of private companies, to provide in the articles that a director should be irremovable or only removable by an extraordinary resolution; in the former case the articles would have to be altered by special resolution before the director could be removed and of course in either case a three-quarters majority would be required. In many cases this would be impossible, so the Act provided that notwithstanding anything in the articles an ordinary resolution would suffice to remove a director. That was the mischief which the section set out to remedy; to make a director removable by virtue of an ordinary resolution instead of an extraordinary resolution or making it necessary to alter the articles.

An ordinary resolution is not defined nor used in the body of the 1948 Act although the phrase occurs in some of the articles of Table A in Sch 1 to the Act. But its meaning is, in my opinion, clear. An ordinary resolution is in the first place passed by a bare majority on a show of hands by the members entitled to vote who are present personally or by proxy and on such a vote each member has one vote regardless of his shareholding. If a poll is demanded then for an ordinary resolution still only a bare majority of votes is required. But whether a share or class of shares has any vote on the matter and, if so, what is its voting power on the resolution in question depends entirely on the voting rights attached to that share or class of shares by the articles of association.

I venture to think that Ungoed Thomas J overlooked the importance of art 2 of Table A which gives to the company a completely unfettered right to attach to any share or class of shares special voting rights on a poll or to restrict those rights as the company may think fit. Thus, it is commonplace that a company may and frequently does preclude preference shareholders from voting unless their dividends are in arrear or their class rights are directly affected. It is equally commonplace that particular shares may be issued with specially loaded voting rights which ensure that in all resolutions put before the shareholders in general meeting the holder of those particular shares can always be sure of carrying the day, aye or no, as the holder pleases.

Counsel for the appellant felt, quite rightly, constrained to admit that if an article

Page 57 of [1970] 1 All ER 53

provided that the respondent’s shares should, on every occasion when a resolution was for consideration by a general meeting of the company, carry three votes such a provision would be valid on all such occasions including any occasion when the general meeting was considering a resolution for his removal under s 184.

My Lords, I cannot see any difference between that case and the present case where special voting rights are conferred only when there is a resolution for the removal of a director under s 184. Each case is an exercise of the unfettered right of the company under art 2 whereby:

‘… any share in the company may be issued with such … special rights … in regard to … voting … as the company may from time to time by ordinary resolution determine.’

Parliament has never sought to fetter the right of the company to issue a share with such rights or restrictions as it may think fit. There is no fetter which compels the company to make the voting rights or restrictions of general application and it seems to me clear that such rights or restrictions can be attached to special circumstances and to particular types of resolution. This makes no mockery of s 184; all that Parliament was seeking to do thereby was to make an ordinary resolution sufficient to remove a director. Had Parliament desired to go further and enact that every share entitled to vote should be deprived of its special rights under the articles it should have said so in plain terms by making the vote on a poll one vote one share. Then, what about shares which had no voting rights under the articles? Should not Parliament give them a vote when considering this completely artificial form of ordinary resolution? Suppose there had here been some preference shares in the name of the respondent’s wife, which under the articles had in the circumstances no vote; why in justice should her voice be excluded from consideration in this artificial vote? I only raise this purely hypothetical case to show the great difficulty of trying to do justice by legislation in a matter which has always been left to the corporators themselves to decide.

I agree entirely with the judgment of the Court of Appeal ([1969] 1 All ER 1002, [1969] 2 WLR 1067), and would dismiss this appeal.

LORD DONOVAN: My Lords, the issue here is the true construction of s 184 of the Companies Act 1948; and I approach it with no conception of what the legislature wanted to achieve by the section other than such as can reasonably be deduced from its language.

Clearly it was intended to alter the method by which a director of a company could be removed while still in office. It enacts that this can be done by the company by ordinary resolution. Furthermore, it may be achieved notwithstanding anything in the company’s articles, or in any agreement between the company and the director.

Accordingly any case (and one knows there were many) where the articles prescribed that a director should be removable during his period office only by a special resolution or an extraordinary resolution, each of which necessitated, inter alia, a three to one majority of those present and voting at the meeting, is overridden by s 184. A simple majority of the votes will now suffice; an ordinary resolution being, in my opinion, a resolution capable of being carried by such a majority. Similarly any agreement, whether evidenced by the articles or otherwise, that a director shall be a director for life or for some fixed period is now also overreached.

The field over which s 184 operates is thus extensive for it includes, admittedly, all companies with a quotation on the Stock Exchange. It is now contended, however, that it does something more; namely, that it provides in effect that when the

Page 58 of [1970] 1 All ER 53

ordinary resolution proposing the removal of the director is put to the meeting each shareholder present shall have one vote per share and no more; and that any provision in the articles providing that any shareholder shall, in relation to this resolution, have ‘weighted’ votes attached to his shares, is also nullified by s 184. A provision for such ‘weighting’ of votes which applies generally, ie as part of the normal pattern of voting, is accepted by the appellant as unobjectionable; but an article such as the one here under consideration which is special to a resolution seeking the removal of a director falls foul of s 184 and is overridden by it.

Why should this be? The section does not say so, as it easily could. And those who drafted it and enacted it certainly would have included among their numbers many who were familiar with the phenomenon of articles of association carrying ‘weighted votes’. It must therefore have been plain at the outset that unless some special provision were made, the mere direction that an ordinary resolution would do in order to remove a director would leave the section at risk of being made inoperative in the way that has been done here. Yet no such provision was made, and in this Parliament followed its practice of leaving to companies and their shareholders liberty to allocate voting rights as they pleased.

When therefore it is said that a decision in favour of the respondent in this case would defeat the purpose of the section and make a mockery of it, it is being assumed that Parliament intended to cover every possible case and block up every loophole. I see no warrant for any such assumption. A very large part of the relevant field is in fact covered and covered effectively. And there may be good reasons why Parliament should leave some companies with freedom of manoeuvre in this particular matter. There are many small companies which are conducted in practice as though they were little more than partnerships, particularly family companies running a family business; and it is, unfortunately, sometimes necessary to provide some safeguard against family quarrels having their repercussions in the boardroom. I am not, of course, saying that this is such a case; I merely seek to repeal the argument that unless the section is construed in the way the appellant wants, it has become “inept’ and ‘frustrated’.

I would dismiss the appeal.

Appeal dismissed.

Solicitors: White & Leonard & Corbin Greener (for the appellant); Layzell, Hayes & Morley-Slinn (for the respondent).

S A Hatteea Esq   Barrister.

Procedure Direction

(House of Lords: Appeal from high court: Application for leave)

[1970] 1 All ER 59

Categories:        PRACTICE DIRECTIONS        

Court:        HOUSE OF LORDS        

Hearing Date(s):        16 DECEMBER 1969.        

House of Lords – Appeal to – High Court, from – Leave – Application for – Procedure – Notice to other parties – Papers – Decision.

House of Lords – Appeal to – High Court, from – Leave – Application for – Time – Extension of time.

Notice is given of the following new direction as to procedure relating to applications to the House of Lords direct from the High Court of Justice in England and Wales, or from the High Court of Justice in Northern Ireland, under Part 2 of the Administration of Justice Act 1969.

Application for leave for appeal to be brought directly from the High Court.

3A. (i) Under Part 2 of the Administration of Justice Act 1969 appeals from the High Court of Justice in England and Wales or from the High Court of Justice in Nothern Ireland may be brought directly to the House in certain civil proceedings, if the necessary certificate is granted by the High Court under s 12 and the necessary leave is granted by the House under s 13.

Applications to the House for such leave may be made by all or any of the parties to the proceedings. The application must be made by petition, which must be lodged within one month from the date on which the certificate was granted by the High Court (which date is not necessarily the same as that on which the certificate was entered, signed or issued) or within such extended time as in any particular case the House may allow. This petition should be typewritten on foolscap paper bookwise and should set forth shortly the facts and points of law and conclude with summarised reasons for leave being granted. The petition must be signed by the petitioners or their agents. If there is any party not joining in the petition, the petitioners must, not less than two clear days before presenting their petition, give notice in writing to that party or his agents of their intention to present the petition, and must endorse on the petition a certificate of such notice having been given. One copy of the High Court’s certificate must be lodged with the petition.

Papers for the appeal committee

(ii) The petition for such leave will be referred to an appeal committee, for whose use the following papers must be lodged either at the same time as, or within one week after, the lodgment of the petition:

(a) four additional copies of the petition for such leave;

(b) five copies of the order of the High Court;

(c) four additional copies of the High Court’s certificate if not contained in the order;

(d) five copies of the transcript of the judgment or judgments of the High Court;

(e) one copy of the pleadings and of any other documents considered necessary.

Decision and notification

(iii) The petition for such leave will be considered by an appeal committee without a hearing. Their decision will be notified to the House in the minutes of proceedings and all parties will be informed in writing immediately after such notification.

(iv) No fee is payable on a petition for such leave, and no appearance should be entered thereto.

Extension of time in which to lodge petition

(v) A request for extension of the time for lodging a petition for such leave must be made within one month from the date on which the certificate was granted by the

Page 60 of [1970] 1 All ER 59

High Court. The request must state the reasons for the time to be extended and must be accompanied by not less than three copies of the transcript of the judgment or judgments of the High Court. Such copies can be taken into account under para (ii) (d) of this direction.

This direction will come into operation on 1 January 1970.

David Stephens,   Clerk of the Parliaments

Settlement Corporation and Others v Hochschild (No 2)

[1970] 1 All ER 60

Categories:        CIVIL PROCEDURE        

Court:        CHANCERY DIVISION        

Lord(s):        BUCKLEY J        

Hearing Date(s):        28, 29, 30 APRIL, 1, 2, 12 MAY 1969        

Practice – Parties – Joinder of parties – Necessary party – Party whose presence necessary to ensure all matters in dispute effectually and completely determined – RSC Ord 15, r 6(2)(b).

In or about 1951 the founder procured the incorporation in Panama of the second plaintiff (‘Consolidated’) and transferred to it interests in industrial and trading businesses. The capital consisted of 32,000 shares of which 18,000 were invested in a Liechtenstein trust for the benefit of the founder’s family and 14,000 in another Liechtenstein trust for a discretionary class of employees of the second plaintiff. In 1958, the 32,000 shares were transferred from the two trusts to a foundation established under Liechtenstein law, which was governed by a statute which controlled the objects and beneficiaries thereunder. The council of the foundation consisted of the founder, the defendant (his son), and the fourth, fifth and seventh plaintiffs. In 1960 the founder without notice to the defendant but with the concurrence of the fourth, fifth, sixth and seventh plaintiffs vested the assets of the foundation in the third plaintiff, a trust corporation with the founder his wife and the fourth, fifth, sixth and seventh plaintiffs as trustees of the settlement (‘the 1960 trust’). The beneficial interests under the settlement varied substantially from those under the foundation, and contained a provision forfeiting the interest of any person instituting an action challenging the validity of the trust or making any claim against it. In 1960 the defendant commenced proceedings in Liechtenstein, Panama and New York, challenging the validity of the 1960 trust and seeking the restoration of the 32,000 shares to the foundation. In 1961, the defendant entered into a compromise agreement with the Settlement Corporation and Consolidated, the former having been formed for the purpose of the compromise, by which the defendant agreed,inter alia, that in consideration of a payment of a sum of money he would approve the 1960 trust and not commence or prosecute any action or proceedings prejudicing the trust or the trustees’ title thereof and waived all his rights as beneficiary, trustee or director under the previous trusts and foundation, and released the fourth, fifth, sixth and seventh defendants from all claims. In 1965 the founder died. In June 1965, the defendant commenced proceedings in France against the trustees, other than the third plaintiff, claiming as sole heir of the founder that he was entitled under French, Argentinian and Chilean laws to a reserved share of the founder’s estate and claiming an annulment of the transfer by the founder of the 32,000 shares and an interim sequestration thereof. In July 1957 ([1965] 3 All ER 486), the plaintiffs commenced an action to restrain

Page 61 of [1970] 1 All ER 60

the defendant from prosecuting the French action so far as it sought, inter alia, to annul the 1960 trust and sequestrate the shares on the basis that the action was in breach of the compromise agreement. The defendant counterclaimed, inter alia, for a declaration that the compromise agreement and transactions under it were void, declarations as to his rights as heir of the founder under various systems of law or, alternatively, for an order for the transfer of 32,000 shares to the foundation. In 1967, the defendant’s two infant sons commenced an action in the Bahamas by their next friend seeking the removal of the trustees of the 1960 trust and alleging fraud and dishonesty on the part of certain trustees. By deed of covenant dated January 1968 the defendant covenanted to pay a specified fraction of the value of any property which he received as a result of legal proceedings to a trust fund established for the benefit of his children or remoter issue. In the action commenced in July 1965 the plaintiffs sought to join the defendant’s three infant children (‘the infants’) as defendants to the counterclaim under RSC Ord 15, r 6(2)(b)a. The infants by their next friend moved to stay all further proceedings for their addition as defendants to the counterclaim.

Held – (i) If a narrow construction were placed on RSC Ord 15, r 6(2)(b), the mere fact that the relief might affect someone who was not a party in respect of his rights or obligations was not enough to give rise to jurisdiction under the rule; it must also be shown that he was a person whose presence before the court was necessary to ensure that all matters in dispute in the cause or matter might be effectually and completely determined and adjudicated on (see p 67 d and e, post). Normally where trustees were sued as such the judgment or order would bind the beneficiaries and affect their equitable rights (Ord 15, r 14) (see p 67 f, post), but where, as here, the trustees (the plaintiffs) were themselves the objects (in certain instances) of allegations of fraud and misconduct the trustees inevitably had personal interests distinct from their fiduciary obligations to protect the beneficiaries’ interests and this might well make joinder of one or more beneficiaries desirable if not essential (Read v Prest (1854) 1 K & J 183 applied) (see p 67 j, post). The infants themselves, however, were unwilling to be joined since, by virtue of the 1968 deed of covenant and trust deed they had interests distinct from their beneficial interests under the 1960 trust, tending in a contrary direction and perhaps outweighing those interests (see p 69 e, post); accordingly, because in the circumstances the court was unlikely to order that the judgment on the counterclaim should not bind them, it could not be said that the infants were persons whose presence before the court was necessary to ensure that all matters in dispute on the counterclaim might be effectually and completely determined and adjudicated on (see p 69 h and j, post).

(ii) Alternatively, if the infants fell within a broad construction of Ord 15, r 6(2)(b), giving the court power to join any party having a claim relating to the subject-matter of the action, the court’s discretion should not be exercised so as to join them (see p 70 a, post).

Amon v Raphael Tuck & Sons Ltd [1956] 1 All ER 273 and Gurtner v Circuit [1968] 1 All ER 328 considered.

Notes

For joinder of defendants, see 30 Halsbury’s Laws (3rd Edn) 317, 318, para 578, and for cases on the subject, see 50 Digest (Repl) 460–462, 1550–1567.

Page 62 of [1970] 1 All ER 60

Cases referred to in judgment

Amon v Raphael Tuck & Sons Ltd [1956] 1 All ER 273, [1956] 1 QB 357, [1956] 2 WLR 372, 50 Digest (Repl) 452, 1489.

Gurtner v Circuit [1968] 1 All ER 328, [1968] 2 QB 587, [1968] 2 WLR 688, Digest (Repl) Supp.

Read v Prest (1854) 1 K & J 183, 69 ER 421, 47 Digest (Repl) 278, 2411.

Cases also cited

Byrne v Brown (1889) 22 QBD 657.

Re Cooper (1881) 20 Ch D 611.

Fire Auto and Marine Insurance Co Ltd v Greene [1964] 2 All ER 761; [1964] 2 QB 687.

Francis v Harrison [1889] 43 Ch D 183.

Merry v Pownall [1898] 1 Ch 306.

Moody v Cox and Hatt [1917] 2 Ch 71.

Moser v Marsden [1892] 1 Ch 487, [1891–94] All ER Rep 458.

Payne v Parker (1866) 1 Ch App Cas 327.

Re Smith, Ex parte London and North Western Ry Co and Midland Ry Co (1888) 40 Ch D 386.

Re Vandervell’s Trusts [1969] 1 All ER 1056, [1969] 1 WLR 437.

Summons for directions and motion

The plaintiffs, seven of whom were trustees of the 1960 settlement, sought to have the three infant children of the defendant, Gerardo Jorde Hochschild, joined as defendants to the counterclaim under RSC Ord 15, r 6(2)(b). The children by their next friend sought by a motion under the Supreme Court of Judicature (Consolidation) Act 1925, s 41, to stay further proceedings for their joinder. The plaintiffs were: (1) the Settlement Corporation; (2) Empresas Sudamericanas Consolidadas SA (‘Consolidated’); (3) the Trust Corporation of Bahamas Ltd; (4) Paul Hirsch; (5) Gerardo Goldberg; (6) Ernest Fraenkel; (7) Enrique Mendelssohn; (8) Rolf Weinberg; (9) Luis Hochschild; and (10) Oscar Heineberg. The facts are set out in the judgment.

David Hirst QC and J Bradburn for the plaintiffs.

R J Parker QC and D J Nicholls for the defendant.

P R Oliver QC and C A Brodie for the infants.

Cur adv vult

12 May 1969. The following judgment was delivered.

BUCKLEY J read the following judgment. There are two applications before the court; first, one by the plaintiffs by notice under the summons for directions whereby the plaintiffs ask that the three infant children or the defendant, none of whom is over eight years old, be added as defendants to the plaintiffs’ counterclaim in the action, and that the Official Solicitor be appointed their guardian ad litem; and, secondly, a motion on behalf of the three infants by a next friend under the Supreme Court of Judicature (Consolidation) Act 1925, s 41, for a stay of all further proceedings for their addition as defendants to the counterclaim on the grounds: (a) that the defendant has not consented to their being joined and seeks no relief against them, and that they are not persons who as a matter of law ought to have been, or as a matter of discretion should be, joined as defendants to the counterclaim, nor are they persons whose presence before the court is necessary to ensure that all matters in dispute in the counterclaim are effectually and completely determined and adjudicated; or alternatively (b) that the plaintiffs’ application for the joinder of the children as defendants to the counterclaim is frivolous, vexations or an abuse of process.

The defendant, who claims to be a Chilean national domiciled in Chile, is the only

Page 63 of [1970] 1 All ER 60

child of the late Dr Mauricio Hochschild, whom I will call ‘the founder’, who died on 12 June 1965. The founder appears to have been an Argentine national who died domiciled, it is alleged, either in France or in the German Federal Republic. In or about 1951 the founder procured the incorporation in Panama of the second plaintiff, which I will call ‘Consolidated’, and transferred to it interests of very great value in certain industrial and trading businesses, largely concerned with mining operations in Central and South America, in consequence of which Consolidated now owns or controls through subsidiaries business interests of very great value and profit. The capital of Consolidated consists of 32,000 shares. These the founder procured to be vested in or about 1951 as to 18,000 shares in a Liechtenstein trust for the benefit of members of his family and as to 14,000 shares in another Liechtenstein trust for the benefit of a discretionary class of employees of Consolidated.

In 1958, however, in circumstances about which I have heard little or nothing all 32,000 shares were transferred out of these two trusts to a stiftung established in that year by the founder under the law of the Principality of Liechtenstein which I will call ‘the foundation’. The foundation also received a sum of 100,000 Swiss francs from the founder.

The foundation is governed by a statute which declares the object of the foundation to be the management of its property for the benefit of the beneficiaries therein referred to and the distribution of its income and capital for their benefit. The statute prescribes that until 31 December 1976 the net income of the foundation shall be applied, stated shortly, as follows: 51 per cent to be paid to the defendant or his legal or testamentary heirs; 5 per cent to be paid to the plaintiff Luis Hochschild or his legal or testamentary heirs; 18 per cent to be divided equally amongst the members of the council of the foundation other than the founder and the defendant; and the remaining 26 per cent to be distributed at the discretion of the council of the foundation among members of a discretionary class of persons who have rendered meritorious service to Consolidated or its subsidiaries. At 31 December 1976, the capital assets of the foundation are to be distributed as follows: 5 per cent to the plaintiff Luis Hochschild or his legal or testamentary heirs; 10 per cent equally amongst the members of the council then in office other than the defendant and the plaintiff Luis Hochschild; 25 per cent amongst members of the discretionary class who benefited in the preceding year; and the remaining 60 per cent to the defendant or his legal or testamentary heirs. The first members of the council were the founder (who was chairman for life), the defendant (who was to succeed the founder as chairman for life), and the plaintiffs Hirsch, Goldberg and Mendelssohn. By the terms of the statute it was made incapable of alteration as regards the object of the foundation and the beneficiaries thereunder and their interests.

In 1960, however, the founder with the concurrence of the plaintiffs Hirsch, Goldberg and Mendelssohn and of the plaintiff Fraenkel and without notice to the defendant entered on a series of transactions which stripped the foundation of all its assets and vested them in the third plaintiff, the Trust Corporation of Bahamas Ltd, with the founder, his wife and the four individual plaintiffs just referred to as trustees of a settlement dated 5 October 1960, and made under the laws of the Bahama Islands. The beneficial interests under this settlement, which I will call the 1960 trust, differ substantially from those under the statute of the foundation. Under the 1960 trust 40 per cent of the net income of the trust is to be paid to the defendant, and after his death 20 per cent to his widow and 20 per cent to his children or, if he leaves no widow or no children, 40 per cent to his children or 40 per cent to his widow, as the case may be, with further provisions if he leave neither widow nor child. A further 5 per cent of the net income is settled on similar trusts for Luis, his widow and children.

The plaintiffs Hirsch, Goldberg, Fraenkel, Mendelssohn, Weinberg and Heineberg are to get shares of income while they respectively continue in the employ of Consolidated or its subsidiaries which together amount to 17 per cent. The remainder of the net income (ie 38 per cent) is to be distributed amongst members of a discretionary

Page 64 of [1970] 1 All ER 60

class of employees of Consolidated or its subsidiaries selected by the trustees other than the founder and any corporate trustee. The membership of this class is much more restricted than the membership of the discretionary class under the statute of the foundation.

As regards capital, at 31 December 1980 each then beneficiary, except objects of the directionary trust, is to receive a share of capital corresponding to one-fifth of his share of income: at 31 December 2010, a further distribution of capital is to be made in a similar manner. On each distribution of capital the share of income of a beneficiary who participates is to be reduced proportionately. Finally, at the expiration of 20 years from the death of the last survivor of the descendants of the present Queen and of the late President Eisenhower who were living on 5 October 1960 a final proportional distribution of capital is to be made, the participants in which are to include such objects of the discretionary trust as participated in the last annual distribution of income. These trusts of capital are complicated and I have done no more than attempt to indicate their nature.

The 1960 trust contains a clause providing that any beneficiary or other person having an interest thereunder who institutes any action or proceeding challenging the establishment or validity of the trust or any action of the trustees thereunder or making any claim against the trust shall forfeit his interest. The third to tenth plaintiffs in the present action are now the trustees of the 1960 trust.

The defendant in 1960 started proceedings in Liechtenstein, Panama and New York challenging the validity of the 1960 trust and to secure the restoration of the 32,000 shares to the foundation. On 22 June 1961, the defendant entered into an agreement which I will call ‘the compromise agreement’ with the first plaintiff, the Settlement Corporation and with Consolidated. The Settlement Corporation is a corporate body established under the law of Panama and was formed for the purposes of the compromise agreement. All its issued shares are held by the trustees. By the terms of the compromise agreement, and in consideration of debentures securing principal sums amounting to (US) $3,300,000 which the Settlement Corporation agreed to issue and deliver to the defendant guaranteed by Consolidated, the defendant: (1) approved the 1960 trust and acknowledged the title of the trustees thereof to the 32,000 shares and undertook not to commence or prosecute any action or proceedings in any court whereby the 1960 trust or the trustees’ title to the shares might be affected or prejudiced; (2) waived all his rights as a beneficiary, trustee, director, member of the council or otherwise under—(a) the two 1951 Liechtenstein trusts, (b) the foundation, and (c) another stiftung which the founder had set up in 1958, and agreed to the dissolution of all these bodies; (3) resigned from the board of the foundation; (4) agreed to withdraw the proceedings then pending in the Liechtenstein courts; (5) agreed to assign to the Settlement Corporation his beneficial interest in both capital and income under the 1960 trust; (6) agreed to cause any wife he might marry to assign to the Settlement Corporation her beneficial interest in both the capital and income under the 1960 trust. Provision was also made in the compromise agreement for discontinuance of the proceedings then pending in Panama and New York, and the defendant released the plaintiffs Hirsch, Goldberg, Fraenkel and Mendelssohn from all claims. It was agreed that the validity of the compromise agreement should be governed by Panamanian law and its construction by the laws of the State of New York.

The debentures of the Settlement Corporation were duly created and delivered to the defendant and the other steps required by the compromise agreement have been carried out including an assignment to the Settlement Corporation by the lady to whom the defendant is now married of her interest under the 1960 trust. In December 1962, an action was commenced in the Bahamas by the defendant’s infant son Maurice suing by a next friend against the trustees of the 1960 trust seeking to obtain the return of the 32,000 shares to the 1958 foundation. In June 1963, an action was commenced in Liechtenstein by the defendant’s same son suing by the defendant

Page 65 of [1970] 1 All ER 60

as his next friend against the trustee for similar relief and to restrain liquidation of the foundation. In December 1966, however, the appellate court in Liechtenstein dismissed the action on the ground that Maurice had no interest under the statute of the foundation enabling him to sue for such relief. Consequent on this, Maurice’s action in the Bahamas was struck out or discontinued in June 1967.

Meanwhile, on 8 June 1967, another action had been started in the Bahamas against the trustees of the 1960 trust, this time in the names of two of the defendant’s infant sons, Maurice and Fabrizio, suing by a Mr Edwards as next friend. In this action the plaintiffs therein allege fraud and dishonest conduct on the part of all the trustees other than the Trust Corporation of Bahamas Ltd and breach of trust on the part of all the trustees and default in rendering proper accounts. The plaintiffs in that action claim removal of the trustees of the 1960 trust and the appointment of new trustees in their places as well as other relief, including an enquiry whether the trustees of the 1960 trust should seek to obtain the cancellation of the compromise agreement and the deeds and instruments executed thereunder or some of them.

The defendants in that action by way of defence deny the allegations of fraud, dishonesty, breach of trust and default, and counterclaim a declaration that by reason of (a) Maurice’s 1962 action in the Bahamas; (b) Maurice’s 1963 action in Liechtenstein; and (c) Maurice’s and Fabrizio’s action in the Bahamas, Maurice and Fabrizio have forfeited their interests under the 1960 trust. By way of defence to the counterclaim it is alleged that the forfeiture clause in the 1960 trust is void and, alternatively, that there had been no breach of it.

The proceedings in the Bahamas are of course being conducted on behalf of Maurice and Fabrizio by lawyers practising there, but they have been working in conjunction with, and have been largely instructed through, solicitors in England who are the defendant’s solicitors.

On 15 June 1965, the defendant started proceedings in France against the trustees of the 1960 trust other than the Trust Corporation of Bahamas Ltd claiming that as sole heir of the founder he is entitled under French, Argentinian and Chilean laws to a reserved share of the founder’s estate and claiming annulment of the transfer by the founder of the 32,000 shares of Consolidated and an interim sequestration of them.

On 9 July 1965, the present plaintiffs commenced the present action in the Chancery Division of this court (See [1965] 3 All ER 486, [1966] Ch 10) to restrain the defendant from prosecuting the French proceedings so far as it is sought therein to annul or set aside the 1960 trust, to sequestrate the 32,000 shares, to collect the profits and proceeds of such shares or otherwise to affect or prejudice the plaintiffs’ title to the shares, and to restrain the defendant from commencing or prosecuting any other action or proceedings in any part of the world whereby the 1960 trust or the trustees’ title to the shares may be affected or prejudiced. These claims are made on the basis that the French action is a breach of the compromise agreement.

By his defence in the action the defendant alleges, inter alia, that he lacked capacity to enter into the compromise agreement, his capacity for this purpose falling to be determined by Chilean law, the law of his nationality and domicil; that under the same law and also under Liechtenstein law the compromise agreement is illegal, void and unenforceable, and that under Panamanian law the compromise agreement is void. By way of counterclaim the defendant claims, inter alia, a declaration that the compromise agreement and the transactions under it are void or not binding on him; declarations as to his rights as heir of the founder to a sharing of his estate under various systems of law; to have dispositions made by the founder in his lifetime voluntarily or for inadequate consideration set aside to give effect to his, the defendant’s, rights as heir; alternatively, an order for the transfer of the 32,000 shares as to the foundation; and much relief of an ancillary character.

Page 66 of [1970] 1 All ER 60

In these circumstances the plaintiffs now seek to have the defendant’s three infant children joined as defendants to the counterclaim under RSC Ord 15, r 6(2)(b). This they ask for on the following grounds: (1) the jurisdiction of the court is founded on the rule; (2) on the proper construction of the rule the jurisdiction arises where the determination of a matter in dispute in an action will directly affect the legal rights of a third person; (3) this is so without regard to whether the third person will be bound by the judgment, or whether the court would be unable to adjudicate on the matter at issue in his absence, or whether the plaintiff could have claimed any relief directly against the third person; (4) it is irrelevant whether the plaintiffs or the third person object to the joinder; (5) the court in deciding whether to make the order is concerned with the interests not merely of the parties but of the notice and with ensuring that it will be able properly to discharge its task of determining the issue effectually and completely. The plaintiffs also draw attention to the desirability of avoiding multiplicity of actions and to the concern which the court has to protect infants.

In Amon v Raphael Tuck & Sons Ltd, Devlin J reviewed the law in this respect with great care. After stating ([1956] 1 QB at 361) that there were two views of the scope of the rule (one that it gave a wife power to the court to join any party having a claim relating to the subject-matter of the action, and the other that limitations had been placed on the jurisdiction by decided cases) he preferred the narrower view ([1956] 1 All ER at 285, [1956] 1 QB at 378). He said ([1956] 1 All ER t 281, [1956] 1 QB at 371):

‘If this is the line of authority that is the correct one to apply, then I think the test is: “May the order for which the plaintiff is asking directly affect the intervener in the enjoyment of his legal rights?”’

Later he said ([1956] 1 All ER at 187, [1956] 1 QB at 381):

‘It is not enough that the intervener should be commercially or indirectly interested in the answer to the question; he must be directly or legally interested in the answer. A person is legally interested in the answer only if he can say that it may lead to a result that will affect him legally—that is by curtailing his legal rights.’

It has been said that the Court of Appeal in Gurtner v Circuit disagreed with Devlin J’s adoption of what he termed the narrower construction of the rule. It is true that Lord Denning MR so said ([1968] 1 All ER at 332, [1968] 2 QB at 595), but he did not state precisely in what respect he differed from Devlin J. Diplock LJ made clear ([1968] 1 All ER at 335, 336, [1968] 2 QB at 601, 602) that he thought that Devlin J was mistaken, not in either of the passages I have read, but in a passage where Devlin J said ([1956] 1 All ER at 286, 287, [1956] 1 QB at 380):

‘The person to be joined must be someone whose presence is necessary as a party. What makes a person a necessary party? It is not, of course, merely that he has relevant evidence to give on some of the questions involved; that would only make him a necessary witness. It is not merely that he has an interest in the correct solution of some question involved and has thought of relevant arguments to advance and is afraid that the existing parties may not advance them adequately. That would mean that on the construction of a clause in a common form contract many parties would claim to be heard, and, if there were power to admit any, there is no principle of discretion by which some could be admitted and others refused. The court might often think it

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convenient or desirable that some of such persons should be heard so that the court could be sure that it had found the complete answer, but no one would suggest that it is necessary to hear them for that purpose. The only reason which makes it necessary to make a person a party to an action is so that he should be bound by the result of the action, and the question to be settled, therefore, must be a question in the action which cannot be effectually and completely settled unless he is a party.’

In Gurtner v Circuit the Motor Insurers’ Bureau was directly interested in the outcome of the plaintiff’s action, not in any respect in which a lis could have arisen between the plaintiff and the bureau, but nevertheless in a way which affected the bureau legally in the sense that it had a direct bearing on the bureau’s legal obligations under its agreement with the Minister of Transport. In any case, if particular circumstances satisfy Devlin J’s test stated in his judgment ([1956] 1 All ER at 281, [1956] 1 QB at 371) they must also satisfy the interpretation favoured by the Court of Appeal. Accordingly if the relief sought by a plaintiff or, as in the present case, a counterclaiming defendant may affect a third person in respect of his legal rights or obligations the jurisdiction under the rule may arise.

No distinction is, I think, to be drawn here between rights and obligations at common law and equitable rights and obligations. The mere fact, however, that the relief may affect someone who is not a party in respect of his rights or obligations is not enough, in my judgment, to give rise to jurisdiction under the rule. In respect of anyone who is not a person ‘who ought to have been joined as a party’ it must still be demonstrated that he is a person (See RESC Ord 15 r 6(2)(b)—

‘… whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon … ’

For example in a representative action a member of the class represented by a party will be liable to be affected in his legal rights or obligations by the judgment or order, but the case would not be one falling within the terms of the rule unless he was not adequately represented by the party chosen to represent him, and so there would, I think, be no jurisdiction to add him as a party under the rule. So also, where trustees are sued as such, the judgment or order will, unless the court otherwise directs, bind their beneficiaries and affect their equitable rights (see RSC Ord 15, r 14) but such a case would not fall within RSC Ord 15, r 6(2)(b), unless for some reason the trustees either could not or would not adequately represent some one or more of their beneficiaries.

In the present case there is no doubt that that part of the relief sought in the counterclaim which, if granted, would result in all or some part of the 32,000 shares being withdrawn from the 1960 trust would affect the beneficial interests of the infants under that trust. It is of course the duty of the trustees of the 1960 trust to protect their trust fund. The trustees or some of them themselves have beneficial interests under the 1960 trust and would be similarly concerned as beneficiaries. But some of the personal trustees are the objects of grave allegations of fraud and dishonesty in both the Bahamas action and this action and all the trustees are accused of breaches of trust. This inevitably means that the trustees have personal interests distinct from their fiduciary obligations to protect their beneficiaries’ interests (see Read v Prest) which may well make the joinder of one or more beneficiaries desirable, if not essential.

In Read v Prest a settlor sought to have a settlement set aside alleging that she had been induced to make it by the fraud and undue influence of the two trustees.

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The only defendants were the trustees, one of whom had a beneficial interest under the settlement. The defendants objected that the proceedings were defective because, as they asserted, all the beneficiaries ought to have been joined as defendants. Sir William Page Wood V-C said ((1854) 1 K & H at 184, 185):

‘The trustees in this case are expressly charged with fraud in obtaining the settlement. It must, therefore, be assumed, for the purpose of the argument, that such fraud may be proved against them, and that, to avoid the result, they are capable of further fraud and misconduct. That being so, it seems to me, notwithstanding the provisions of the stat. 15 & 16 Vict., c 42 [ie the Chancery Procedure Act 1852] referred to in the argument, that the question at issue, which is in effect whether or not the trustees have been guilty of the fraud and misconduct charged by the bill, is one which cannot be tried in their presence only, without any of the absent parties beneficially interested.’

He then explains why he thinks that the beneficial interest of one of the trustees is insufficient in that respect, and he went on to say ((1854) 1 K & J at 185):

‘It is not necessary that all the absent persons beneficially interested should be made parties, but some of them must be so; and it would probably be the best course to select some one or more of such of them as are infants, and to let counsel be instructed to appear for them, it being the duty of counsel in all cases where infants are represented to urge every reasonable objection and argument on their behalf. The counsel on both sides had better agree which of the infants shall be selected, but they must not be next of kin of the testator.’

There I find the word ‘testator’ must be a mistake for the word ‘settlor’, which I see is the word used in the headnote.

In the present case I do not feel that it is necessary to go so far as Sir William Page Wood V-C went in Read v Prest in assuming that the defendants in that case were capable of further fraud and misconduct. Without in the present case making any such assumption in respect of any of the plaintiffs it seems to me clear that some at least of them by reason of the accusation of fraud and misconduct levelled at them will have personal interests in the proceedings which may conflict with their duties as trustees. Moreover, in the Bahamas action those of the present plaintiffs who are defendants in that action have in their counterclaims chosen to adopt an attitude which is actually hostile to two of the infants. In these circumstances it seems to me that the present plaintiffs as a body cannot satisfactorily represent the beneficiaries under the 1960 trust in defending the counterclaim in this action.

The next question is whether the infants, who by their counsel, instructed by their next friend, have said that they do not wish to be joined as defendants to the counterclaims, or any of them, should nevertheless be joined. By a deed of covenant dated 10 January 1968 which recited, inter alia, that the defendant had been advised that his children might suffer some financial loss if he were successful on his counterclaim in this action or if in the Bahamas action the trustees of the 1960 trust were directed to transfer the 32,000 shares of the foundation and that he wished to make good any such loss, the defendant has covenanted that he or his personal representatives will pay to the covenantees or other of the trustees of a trust deed which I will mention next a sum or sums equal to twice a specified fraction of the value of any property which he, the defendant may, at any time receive as a beneficiary under the foundation or as legal or testamentary heir of the founder or by reason of his, the defendant’s, legitimate portion under the law of the founder’s domicil at his death or otherwise howsoever as a result of either this action or the Bahamas action or their joint effect or by reason of any compromise of those actions or either of them.

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By a trust deed dated 4 January 1968 and made under Liechtenstein law between the same parties as the deed of covenant the defendant settled a sum of money in certain trusts for the benefit of his children and remoter issue. The deed of covenant provided that any sums payable thereunder should be held in the trusts of this trust deed. The fraction specified in the deed of covenant is one which has to be ascertained by reference to the value, at the date when this action and the Bahamas action should have been finally disposed of, of the interests of the infants under the 1960 trust and, putting it shortly, to the value of the capital assets of that trust. I do not pause to read the relevant clause of the deed. It has, however, been heavily criticised by counsel for the plaintiffs on the ground that, as he says, its requirements are so complicated and the valuations would involve so many imponderables that it would be exceedingly difficult to arrive at the specified fraction. The trust deed has also been criticised on the ground that it is said to give the infants much less secure benefits than st first appear. These are indeed important matters for the infants’ next friend to consider; for in deciding what attitude to adopt on behalf of the infants in the disputes between the plaintiffs and the defendant the value of the deed of covenant and the trust deed associated with it is an important element in assessing the balance of advantage to the infants. No one, however, has suggested that the infants’ next friend for the purpose of their motion in this action is otherwise than impartial or is actuated by any consideration except the best interests of the infants.

Criticism is made of the fact that the firm of solicitors advising the infants’ next friend are also the defendant’s solicitors and of the fact that both the counsel now appearing before me on behalf of the infants were until June 1968 counsel for the defendant. Counsel for the plaintiffs however, disclaims any intention of suggesting any professional misconduct or impropriety. He merely urges that the next friend ought to be advised by wholly independent advisers. Whatever weight may be proper to give to these considerations, it is, I think, clear that the infants have interests which are distinct from their beneficial interests under the 1960 trust, tending in a contrary direction and perhaps outweighing those beneficial interests. It is for the infants’ next friend and his advisers to decide where the infants’ interests lie and I see no reason to doubt that the next friend here has done his best to do so or to doubt that his professional advisers have advised him honestly and conscientiously. He has decided that the infants should not fight the defendant’s counterclaim. This, in my judgment, makes the infants inappropriate defendants to the counterclaim to represent the class of beneficiaries and discretionary objects under the 1960 trust.

If they were to be joined as representative beneficiaries, they might find themselves compelled to present an argument which their advisers believed to be contrary to their own interests. If they were joined merely in their personal capacities and supported the defendant, in the counterclaim, they would run risks of further claims that they had forfeited their interests under the 1960 trust. They are not, in my view, suitable representative defendants to the counterclaim. Had they wished to be joined, not as representatives but in their own interests, there might have been good grounds for joining them, but this is not their wish. If they are not joined, any judgment or order on the counterclaim will be binding on them under RSC Ord 15, r 14, unless the court otherwise orders. If they elect not to be joined as defendants to the counterclaim, I cannot imagine that this court would in any other proceedings order that the judgment on the counterclaim should not bind them. Their presence is accordingly not necessary for the purpose of binding them.

This leads me to the conclusion that the infants are not persons whose presence before the court is necessary to ensure that all matters in dispute in the counterclaim may be effectually and completely determined and adjudicated on. It may be desirable that some beneficiary, or object of the discretionary trust, under the 1960 trust be added as a defendant to the counterclaim, but, if so, this should be some person whose only interest in the matter arises under that trust or whose interest under that trust so clearly outweights any other interest he may have as to make

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him indisputably concerned to support the 1960 trust. The infants are not, in my view, should persons, and I decline to order their joinder as defendants to the counterclaim. I do so either on the ground that they do not fall within the terms of the rule, so that I could not join them even if I wished to do so, or on the ground that, if they ought to be regarded as falling within the rule, I decline to join them in the exercise of my discretion under the rule.

Counsel for the infants have suggested that the plaintiffs’ application has been prompted by a desire to necessitate a change of professional advisers of the infants both in this country and in the Bahamas action for if the infants are made defendants to the counterclaim the defendant’s solicitors, who are at present advising the next friend, could not continue to act for him. I ought not, I think, to express any view about the representation in the Bahamas action. That appears to me to be a matter for the Bahamian court with which it is fully competent to deal. As I do not propose to make the infants parties to the English proceedings no question of this kind at present arises in those proceedings.

Summons dismissed. Stay on all further proceedings to join infants as defendants to counterclaim. Leave to appeal refused.

Solicitors: Herbert Oppenheimer, Nathan & Vandyk (for the plaintiffs); Herbert Smith & Co (for the defendants and the infants).

Rosalie Long   Barrister.

Kent County Council v Kingsway Investments (Kent) Ltd 

Kent County Council v Kenworthy

[1970] 1 All ER 70

Categories:        TOWN AND COUNTRY PLANNING        

Court:        HOUSE OF LORDS        

Lord(s):        LORD REID, LORD MORRIS OF BORTH-Y-GEST, LORD GUEST, LORD UPJOHN AND LORD DONOVAN        

Hearing Date(s):        27, 29, 30 OCTOBER, 3, 4, 5, 10, 11 NOVEMBER, 16 DECEMBER 1969        

Town and country planning – Development – Permission for development – Condition – Outline planning permission to lapse if detailed plans not submitted and approved within three years – Whether ultra vires – Whether severable – Town and Country Planning Act 1947, s 14.

Outline planning permission was granted in 1952a by a local planning authority (the appellants) to the respondents’ predecessor in title. Permission was granted subject, inter alia, to the following conditions: ‘(i) that details relating to layout, siting, height, design and external appearance of the proposed buildings; and means of access thereto, shall be submitted to and approved by the Local Planning Authority before any works are begun; (ii) the permission shall cease to have effect after the expiration of three years unless within that time approval has been notified to those matters referred to in condition (i) above.' None of the plans submitted was approved and the time provided for in condition (ii) was extended. In September 1962 no plans had been approved and a further extension of time was refused. In 1966 the respondents challenged the validity of condition (ii).

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Held (Lord Reid and Lord Upjohn dissenting) – (1) Condition (ii) was not void, because—

(a) (Lord Reid and Lord Upjohn concurring in this holding) one condition attached to outline permissions (cf condition (i)) was attached by reason of the Town and Country Planning General Development Order 1950b, art 5(2)(i); any other condition must necessarily be relevant to the grant and some time conditions might fall into such a category (see p 73 a and c, p 81 j to p 82 a, p 88 c, d and f, p 92 f and p 96 e, post);

(b) it could not be said that condition (ii) was in a form that took power of compliance away from or outside the control of the grantee for by submitting details for approval some two or three months before the end of the three-year period the grantee would necessarily have time (the local planning authority being required to give its decision within two months) in which to appeal to the Minister; and it was in the highest degree unlikely that a local planning authority would deem the permission at an end if before the expiration of the three-year period it had refused permission and at some date after the expiration of the three-year period its decision was overruled by the Minister (see p 84 b and d, p 88 j, p 89 a, and p 96 e, post);

(c) condition (i) was attached to outline permissions by statutory instrument and the same instrument made provision for appeal to the Minister; accordingly, it must have been the intention that if a refusal of permission by a local planning authority were overruled by the Minister on appeal, the Minister’s decision would satisfy the condition (see p 84 j to p 85 a, p 88 h and p 96 e; cf per Lord Reid, p 74 d, and p 75 a, post); the term approval in condition (ii) must however have the same meaning as in condition (i) (ie approval by the local planning authority) and similarly condition (ii) could not be said to restrict the right of appeal; accordingly, development could be commenced, if, despite a refusal of approval by a local planning authority, the Minister overruled the authority’s decision on appeal (see p 84 f, p 85 e and g, p 88 j and p 96 e; cf per Lord Reid, p 74 e, and p 75 c, post);

(d) accordingly, the effect of condition (ii) was that the outline permission ceased to have effect after the expiration of three years unless within that time approval had been notified by the local planning authority or unless it was held on appeal that within that time approval should have been notified by the local planning authority to the matters referred to in condition (i) (see p 85 h, p 89 d and p 96 e, post);

(2) alternatively (had condition (ii) been void), condition (ii) was of fundamental importance to the local planning authority and accordingly could not have been severed from the permission as a whole (see p 86 g, p 89 j to p 90 a and p 96 e, post).

Per Lord Guest: planning permission is an animal sui generis not to be compared with licences and similar permissions. Planning permission is entire. If a condition as to its grant flies off owing to its invalidity, the whole planning permission must go; and it is impossible to separate the outline permission without the time limit from the grant (see p 89 h, post).

Decision of the Court of Appeal (sub nom Kingsway Investments (Kent) Ltd v Kent County Council [1969] 1 All ER 601) reversed.

Notes

For conditions in planning permissions, see 37 Halsbury’s Laws (3rd Edn) 304–307, para 414, and for cases on the subject, see 45 Digest (Repl) 340–343, 54–64.

Cases referred to in opinions

Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1947] 2 All ER 680, [1948] 1 KB 223, [1948] LJR 190, 177 LT 641, 112 JP 55, 45 Digest (Repl) 215, 189.

Crisp from the Fens Ltd v Rutland County Council [1950] WN 72, 114 JP 105, 45 Digest (Repl) 341, 57.

Page 72 of [1970] 1 All ER 70

Davis v Miller [1956] 3 All ER 109, [1956] 1 WLR 1013, 120 JP 503, 45 Digest (Repl) 349, 89.

Ellis v Dubowski [1921] 3 KB 621, [1921] All ER Rep 272, 91 LJKB 89, 126 LT 91, 85 JP 230, 27 Cox, CC 107, 45 Digest (Repl) 213, 173.

Fawcett Properties Ltd v Buckingham County Council [1960] 3 All ER 503, [1961] AC 636, [1960] 3 WLR 831, 125 JP 8; affg [1958] 2 All ER 321, [1959] Ch 543, [1959] 2 WLR 884; revsg [1958] 3 All ER 521, [1958] 1 WLR 1161, 45 Digest (Repl) 342, 60.

Hall & Co Ltd v Shoreham-by-Sea Urban District Council (1963) 61 LGR 508; revsd CA [1964] 1 All ER 1, [1964] 1 WLR 240, 128 JP 120, 45 Digest (Repl) 342, 61.

Hamilton v West Sussex County Council [1958] 2 All ER 174, [1958] 2 QB 286, [1958] 2 WLR 873, 122 JP 294, 45 Digest (Repl) 339, 49.

Kruse v Johnson [1898] 2 QB 91, [1895–99] All ER Rep 105, 67 LJQB 782, 78 LT 647, 62 JP 469, 19 Cox, CC 103, 13 Digest (Repl) 239, 639.

McDonald v McDonald’s Trustees 1875 2 SC (HL) 125, LR 2 Sc & Div 482, 37 Digest (Repl) 361, 995.

Murray v Inland Revenue Comrs [1918] AC 541, 119 LT 258, 44 Digest (Repl) 200, 130.

Nokes v Doncaster Amalgamated Collieries Ltd [1940] 3 All ER 549, [1940] AC 1014, 109 LJKB 865, 163 LT 343, 44 Digest (Repl) 225, 431.

Paddington Street, Re, 42–48 and 62–72 Chiltern Street, St Marylebone, Marks & Spencer Ltd v London County Council [1951] 2 All ER 1025; revsd CA [1952] 1 All ER 1150, 116 JP 286; sub nom Marks & Spencer Ltd v London County Council [1952] Ch 549; affd HL sub nom London County Council v Marks & Spencer Ltd [1953] 1 All ER 1095, [1953] AC 535, [1953] 2 WLR 932, 117 JP 261, 45 Digest (Repl) 340, 56.

Pigot’s Case (1614) 11 Co Rep 26b, [1558–1774] All ER Rep 50, 77 ER 1177, 7 Digest (Repl) 240, 774.

Potato Marketing Board v Merricks [1958] 2 All ER 538, [1958] 2 QB 316, [1958] 3 WLR 135, Digest (Cont Vol A) 20, 1148a.

Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 All ER 625, [1958] 1 QB 544, [1958] 2 WLR 371; revsd HL [1959] 3 All ER 1, [1960] AC 260, [1959] 3 WLR 346, 123 JP 429, 45 Digest (Repl) 336, 37.

R v Justices of County of London and London County Council [1893] 2 QB 476, 63 LJQB 148, 69 LT 438, 58 JP 8; on appeal [1893] 2 QB 476; affd sub nom London County Council v St George’s Union Assessment Committee [1894] AC 600, 44 Digest (Repl) 304, 1342.

R v Lundie (1862) 31 LJMC 157, 5 LT 830, 26 JP 646, 13 Digest (Repl) 246, 729.

Rossi v Edinburgh Corpn [1905] AC 21, 38 Digest (Repl) 180, * 449.

Theatre de Luxe (Halifax) Ltd v Gledhill [1915] 2 KB 49, [1914–15] All ER Rep 166, 112 LT 519, 79 JP 238, 24 Cox, CC 614, sub nom Halifax Theatre de Luxe Ltd v Gledhill 84 LJKB 649, 45 Digest (Repl) 212, 171.

Appeals

These were appeals by the County Council of the Administrative County of Kent against the order of the Court of Appeal (Lord Denning MR, Davies and Winn LJJ) dated 10 December 1968 and reported [1969] 1 All ER 601, allowing the appeals by the respondent company Kingsway Investments (Kent) Ltd and the respondent Allan Kenworthy from the order of Lyell J dated 29 April 1968 and reported [1968] 3 All ER 197. The facts are set out in the opinion of Lord Morris of Borth-y-Gest.

D G Widdicombe QC and E A Vaughan-Neil for the appellants.

Douglas Frank QC and P Freeman for the respondent company and the respondent Allan Kenworthy.

Their Lordships took time for consideration

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16 December 1969. The following opinions were delivered.

LORD REID. My Lords, the facts in these two cases have been set out by my noble and learned friends and I shall not repeat them. Nor shall I deal with the matter on which your Lordships are all agreed—that there can be valid conditions setting time limits to planning permissions if something is not done within a prescribed time. The question in these cases is whether on their true construction the conditions as to time attached by the appellants to outline planning permissions granted to the respondents are or are not valid.

Section 14(1) of the Town and Country Planning Act 1947 authorises the local planning authority to grant permission to develop land ‘subject to such conditions as they think fit’. But it is, I think, clear that there are limitations on this power to impose conditions. In the first place, any condition must be reasonably related to planning considerations. Secondly, it must not be ultra vires. And thirdly it must not be unreasonable—using that word in a somewhat restricted sense. I do not think that ultra vires and unreasonableness are indistinguishable. A condition is ultra vires if it conflicts with some requirement of the Act. But it may not be unreasonable to attempt to do something which the Act forbids.

These conditions were reasonably related to planning control. If, after outline permission has been given for one development in a particular area, another developer seeks permission for another development in that area, there may be nothing intrinsically wrong with the second proposed development but on planning grounds there may be no room for both in the same area. So in order to do justice to the second application the planning authority must know within a reasonable time whether the first scheme is to proceed. And that requires that some time limit should be put on the availability of the first permission. And no doubt there are other justifications for time limits.

But a time limit can only be intra vires if it does not conflict with the applicant’s statutory right to appeal to the Minister should the local planning authority decide against him. The applicant must act reasonably. He cannot be heard to complain if unreasonable action on his part deprives him of his right to appeal. But he can complain if the operation of the time condition is such that by reason of matters not within his control he may be deprived of that right. I say ‘may be deprived’ because the validity of a condition must be capable of determination when it is first imposed. So if there is any substantial chance that, notwithstanding reasonable action on his part, the condition may operate to cut off his statutory right then the condition must be ultra vires.

I can see nothing wrong in a condition that plans must be approved within three years provided that if at the end of that period an appeal is pending before the Minister the time shall be extended so that the Minister can decide that appeal. If the applicant submits his plans for approval by the local planning authority more than two months before the expiration of the three years no action or inaction of that authority can prevent him from appealing within the three years. If the authority approves within that period well and good—the condition is satisfied. If it rejects or seeks to modify the plans within two months then the applicant can immediately appeal. If it comes to no decision within that period then the Act allows an immediate appeal on the ground that the authority is deemed to have refused the application. And it is not unreasonable that the applicant should have to submit his plans for approval at least two months before the end of the three years.

But it would in my view be ultra vires to impose a condition that the outline permission shall cease to have effect at the end of three years unless plans have been approved within that period. The applicant cannot control the time which the Minister may take to dispose of an appeal, and these matters are often so complicated that the Minister may need more than a year to carry out his duties and reach a decision. So the applicant cannot know how long before the expiry of the three years he must submit his plans for approval if he is to be sure of getting a final decision within that period. It may be that in the great majority of cases there would be no

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difficulty in getting a decision within three years even where an appeal to the Minister is necessary. But as I have said the validity of a condition must be determinable when it is imposed. Circumstances may change and complications may arise even in an apparently simple case. So I do not think we can say that in some cases such a condition would be valid but in others invalid.

It was not argued that there can be any difference between the first (Kingsway) case where the position was complicated and the second (Kenworthy) where it was comparatively simple. So I shall deal first with the condition in the Kenworthy case because it is more simply expressed. Two conditions were imposed in each case and those imposed in the Kenworthy case were:

‘1. The subsequent submission and approval of details relating to:—(a) Siting, height, design and/or external appearance of the building (b) means of access

‘2. The permission ceasing to have effect after the expiration of 3 years from the date of issue unless within that time approval has been signified to those matters reserved under Condition 1 above.’

It appears to me that in condition 1 approval means an approval which enables the development to proceed; if the local planning authority disapproves and that is reversed by the Minister then the approval of the Minister satisfies the condition. If approval meant approval by the local planning authority then in such a case there never would be any approval by the local planning authority and the condition would not be satisfied, but it would be invalid because it would deny the right to appeal if the local authority disapproved and to found on the Minister’s approval if the appeal succeeded.

It further appears to me that approval in condition 2 must have the same meaning, and that this condition plainly means that unless some authority entitled to approve has given its approval—‘signified’ has no technical meaning—before the three years have elapsed the permission ‘ceasing to have effect’ on the expiration of the three years. And if that is so I do not see how a permission which has ceased to have effect could be brought to life again and restored to effectiveness by anything done by the Minister after it had ceased to have effect. So I would hold this condition invalid as conflicting with the statutory right to appeal. It is, I think, proper to give a ‘benevolent’ interpretation to such conditions in the sense that if their wording is reasonably capable of an interpretation which makes them valid that interpretation should be adopted. But that does not entitle a court to read in something which is not there and I could not read into condition 2 some qualification that approval by the Minister after the three years had elapsed was sufficient to satisfy the condition.

The conditions in the Kingsway case are differently expressed. They are:

‘(i) That details relating to layout, siting, height, design and external appearance of the proposed buildings; and means of access thereto, shall be submitted to and approved by the Local Planning Authority before any works are begun;

‘(ii) the permission shall cease to have effect after the expiration of three years unless within that time approval has been notified to those matters referred to in condition (i) above;’

On the face of it condition (i) is invalid because it denies a right of appeal. If the local planning authority disapproves and that decision is reversed then there never is any approval by the local planning authority and the condition would not be satisfied. But this condition is obviously taken from art 5(2) of the Town and Country Planning General Development Order and the Development Charge Application Regulations 1950c. That paragraph is badly drafted because it provides with regard to outline permission that ‘the approval of the authority shall be required with respect to the

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matters reserved’ without any express reference to the right to act on the Minister’s approval if the local authority does not approve. But the 1950 order must be read as a whole and therefore that must be read in to avoid a conflict with the later provisions regarding appeals. I am prepared to assume that that fact does entitle us to read something in to condition (i), although I must say that I find it difficult to relate this to any hitherto recognised ground for holding that a provision read as a whole has a meaning which its words taken by themselves are not reasonably capable of bearing. What then is to be read in? All that would be necessary would be to read in after ‘approved by the Local Planning Authority’ the words ‘or approved by the Minister on appeal’.

In the second condition there is no express reference to the local planning authority and it is not very clear whether the approval therein referred to is approval by that authority or approval by whatever authority is entitled to give approval. But I am prepared to accept the appellants’ argument that it means approval by the local planning authority. Then it is said that, by reason of the close connection between the two conditions, we must also bring in here the expanded meaning of approval adopted in condition (i). Again I am prepared to accept that meaning so that the condition would read ‘unless within that time approval has been notified by the local planning authority or intimated by the Minister on appeal’. But that would not help the appellants because it would mean that, if there was an appeal from an adverse decision of the local authority, the permission would cease to have effect unless the Minister’s approval had been intimated within the three years. If that is what the condition means then for the reasons I have already given I would hold it invalid.

But the appellants’ argument is that we can expand condition (ii) in such a way that the time limit does not apply to the case where there is an appeal to the Minister and he gives approval after the expiry of the three years. It is my misfortune that I have been unable to understand that argument or the grounds or principles on which it is based. It is one thing to say as regards condition (i) that approval by the Minister is equivalent to approval by the local authority. But it is going much further to say with regard to condition (ii) that approval by the Minister is more than equivalent to approval by the local authority so that while the time limit applies to approval by the local authority it does not apply to approval by the Minister. The time limit is the essence of condition (ii). If the condition applies at all I do not understand on what ground we are entitled to disregard the time limit. Nor do I see on what ground we are entitled to say that this condition ceases to have any application after an appeal has been taken to the Minister.

If, as I hold, condition (ii) in each of these cases is ultra vires, then the question arises whether these conditions are severable. If they are severable the conditions must be struck out and the permissions will then continue to be effective for an unlimited time. If the conditions are not severable and are invalid then the permissions themselves must have been invalid ab initio. Whichever way this question is decided the practical consequences could be far-reaching and to say the least embarrassing.

There is a surprising dearth of authority on this matter for it may affect many classes of case besides those relating to town and country planning—cases where an authority has granted a licence or permission coupled with an ultra vires condition or limitation. The question of severance has often arisen with regard to contracts. But there the position is quite different. It is a general rule that the court will not remake a contract and to strike out one term and leave the rest in operation is remaking the contract. So it is not surprising that there can only be severance of a contract in exceptional circumstances.

But that is not so with regard to a unilateral licence or permission. Suppose that a planning authority purports to impose a condition which has nothing whatever to do with planning considerations but is only calculated to achieve some ulterior object thought to be in the public interest. Clearly, in my view, the condition should

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be severed and the permission should stand. But suppose, on the other hand, that a condition, although invalid because ultra vires or unreasonable, limits the manner in which the land can be developed, then the condition would not be severable, for if it were simply struck out the result would be that the owner could do things on his land for which he never in fact obtained permission, and that would be contrary to the intention of the Act. So I am of opinion that Hall & Co Ltd v Shoreham-by-Sea Urban District Council was rightly decided. And I think that the observations of Hodson LJ in Pyx Granite Co Ltd v Ministry of Housing and Local Government ([1958] 1 All ER 625, [1958] 1 QB 544 at 579) were made with this kind of case in view.

But the present case does not fall within either of these classes. It does not fall within the first because these conditions were related to planning considerations. And it does not fall within the second because severing these time conditions would not enable the owners to do anything on their land of a kind which the planning authority did not intend them to do. It would only extend the time during which the owner could act.

The authorities give little help. In a well-known passage in the Pyx Granite case ([1958] 1 All ER 633, [1958] 1 QB at 572) Lord Denning said:

‘The principles to be applied are not, I think, in doubt. Although the planning authorities are given very wide powers to impose “such conditions as they think fit”, nevertheless the law says that those conditions, to be valid, must fairly and reasonably relate to the permitted development. The planning authority are not at liberty to use their powers for an ulterior object, however desirable that object may seem to them to be in the public interest. If they mistake or misuse their powers, however bona fide, the court can interfere by declaration and injunction.’

I entirely agree but I do not think that he had in mind a case like the present case. We were referred to Rossi v Edinburgh Corpn. But this question did not arise there. It was held that it would be ultra vires to attach certain conditions to a licence to sell ice cream, but there was no question of an existing licence which contained ultra vires conditions. The question could have been argued in Theatre de Luxe (Halifax) Ltd v Gledhill and Ellis v Dubowski where ultra vires conditions were attached to cinematograph licences but no one suggested that the result was that exhibitors had been breaking the law by exhibiting without licences. It was recognised that the licences were valid although the conditions were not.

I agree with the statement of principle by Devlin J in Potato Marketing Board v Merricks ([1958] 2 All ER 538 at 547, [1958] 2 QB 316 at 333) when he said:

‘In all these cases, the question to be asked is whether the bad part can be effectively severed from the good. I think that the demand relating to total arable acreage of the farm can be struck out from the form without altering the character of the rest of it.’

I do not think that striking out the time conditions would alter the character of these permissions. And there is a further point of some importance. A multitude of these permissions containing invalid time conditions have been followed by development within the three years and it would be rather absurd if all those permissions were held to have been invalid ab initio so that all those apparently lawful operations

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now turn out to have been in breach of planning legislation. On the other hand, if these conditions are severable all that will happen will be that some outline permissions thought to have expired will still be in force and the planning authority will have to consider whether circumstances have so altered that it is now necessary to revoke them. I would therefore dismiss these appeals.

LORD MORRIS OF BORTH-Y-GEST. My Lords, in each of these appeals a question arises whether a condition which the appellants attached when granting permission for development of land was or was not valid. If the condition is held to be invalid a further question arises whether the permission nevertheless subsisted as though the condition had never been imposed. The condition which has been questioned is substantially although not precisely the same in each appeal.

The facts which are relevant in regard to the first appeal may be briefly stated. A company called CAS (Industrial Developments) Ltd was in the year 1952 interested as prospective purchaser of land which belonged to Mr Shahmoon. The land was known as the Trosley Towers Estate. It comprised an area of some 365 acres. The land was partly within the area of the Strood Rural District Council and partly within the area of the Malling Rural District Council. Some of the land was on the upper part of an escarpment facing south and some of the remainder was wooded land on the top of the escarpment. The desire of the company was to build a large number of houses on the land. The company availed itself of the right given by the Town and Country Planning General Development Order 1950d to make outline applications to the two rural district councils (each one being in respect of the land within the appellant’s area). Article 5(2) of that order provides as follows:

‘Where an applicant so desires, an application, expressed to be an outline application, may be made under the preceding paragraph for permission for the erection of any buildings subject to the subsequent approval of the authority with respect to any matters relating to the siting, design or external appearance of the buildings, or the means of access thereto, in which case particulars and plans in regard to those matters shall not be required and permission may be granted subject as aforesaid (with or without other conditions) or refused, … ’

There are two provisos, the first of which reads:

‘where such permission is granted, it shall be expressed to be granted under this paragraph on an outline application and the approval of the authority shall be required with respect to the matters reserved in the permission before any development is commenced;’

The applications were made on 25 March 1952.

On 14 October 1952, the appellants notified the company that they had granted permission for development of the land in accordance with the particulars supplied with the outline application and had granted permission subject to conditions. In the case of the permission in respect of land in the rural district of Malling the conditions were as follows:

‘(i) that details relating to layout, siting, height, design and external appearance of the proposed buildings; and means of access thereto, shall be submitted to and approved by the Local Planning Authority before any works are begun;

‘(ii) the permission shall cease to have effect after the expiration of three years unless within that time approval has been notified to those matters referred to in condition (i) above;

‘(iii) that any such details shall not include provision for buildings to be erected

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on the escarpment of the North Downs or along the frontage to the Pilgrims’ Way;

‘(iv) that schemes of tree planting shall be submitted to and approved by the Local Planning Authority, carried out within the period referred to in condition (ii) above, and maintained to the satisfaction of the Local Planning Authority for such period of time as may be specified, in respect of any buildings which, in the opinion of the Local Planning Authority, would be prominent in the landscape and as to which screening by way of tree planting is in the Authority’s opinion necessary;’

It is important to observe that no suggestion has been made that the appellants were not entitled to impose conditions (i), (iii) and (iv). It is common ground that although the permission related to the land to which the application related (365 acres) the effect of condition (iii) was that no building at all would be allowed on a very considerable part of that acreage. No suggestion has been made that this could be regarded as a derogation from a grant. The appellants made it very clear that they had no intention of approving any building development on the escarpment of the North Downs or along the Pilgrims’ Way.

The notice to the company set out the grounds for the imposition of the conditions. They were as follows:

‘(i) No such details have been submitted;

‘(ii) in order to prevent the accumulation of permissions in respect of which no details have been submitted;

‘(iii) in order to prevent the carrying out of sporadic development in an area of great landscape value; and

‘(iv) in order to preserve the natural amenities of the area.’

The permission in respect of the land in the rural district of Strood was granted subject to conditions corresponding to conditions (i), (ii) and (iv) in the permission in respect of the land in the rural district of Malling, the omission of condition (iii) (and its related reason) being for geographical reasons.

The company were reminded that if they were aggrieved by the fact that the permission granted to them was subject to conditions they were entitled (by notice served within a month) to appeal to the Minister in accordance with s 16 of the Town and Country Planning Act 1947. They were informed also that the Minister had power to allow a longer period for the giving of a notice of appeal and would exercise the power in cases where an applicant deferred the giving of notice because negotiations were in progress in regard to the proposed development. In fact the company did not appeal. At no time was there an appeal to the Minister in regard to the imposition of condition (ii). But the act that there was no appeal in no way precludes the right, if invalidity is established, to have it proclaimed.

Before examining the contentions which are raised it is only necessary to mention that within the period of three years from 14 October 1952, several layout proposals were submitted. None, however, was acceptable. When, on 26 September 1955, the appellants wrote to Mr Shahmoon in regard to applications made by him, they stated that they agreed to extend the period for the submission of the details referred to in condition (i) (of the permission notified to CAS (Industrial Developments) Ltd). They agreed to extend the period for a further three years from 26 September 1955. So permission continued. During the further three years other layout and siting proposals were submitted. They were not approved. On an application made in June 1958, on behalf of Mr Shahmoon the appellants (on 3 September 1958) agreed to extend the period for submission of details. It was extended for a further period of three years from 26 September 1958. Within this further period certain layout and siting proposals were submitted. None was approved. In 1959 a company, Croudace Ltd, purchased part of the estate and at a later date they received permission

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to proceed with plans for the erection of houses on the area that they had brought. It was an area of 165 acres. That left Mr Shahmoon with 200 acres. By far the greater part of the 200 acres consists of the land on which buildings are not to be erected. In June 1961, the appellants again extended the time for the submission and approval of plans. The extension was for a period of 12 months from 26 September 1961. Before 26 September 1962, an application was made on behalf of Mr Shahmoon for a further extension for a further year. That application was, however, not granted. At some date the respondent company became the owners of the 200 acres; on 20 January 1966, it began the present proceedings. So it comes about that over 13 years after condition (ii) was imposed its validity is challenged. The respondent company claimed that the permission for development granted on 14 October 1952, still subsists. The appellants contend that it expired on 26 September 1962, when the last of the extended periods came to an end. The respondent company based its claim on the contention that condition (ii) was unlawful and of no effect in that it was ultra vires or unreasonable or both.

The second appeal concerns an acre of land in the village of Teston, near Maidstone, of which the respondent Mr Kenworthy is the owner. In November 1952, he applied for outline planning permission to build a house on the site. On 8 January 1953, permission for development was granted subject to two specified conditions which were:

‘1. The subsequent submission and approval of details relating to:—(a) Siting, height, design and/or external appearance of the building (b) means of access

‘2. The permission ceasing to have effect after the expiration of 3 years from the date of issue unless within that time approval has been signified to those matters reserved under Condition 1 above.’

While, as will be seen, there are certain differences between the wording of these two conditions and the wording of the first two conditions in the first appeal, the differences in relation to he second condition are quite minor.

The respondent did not at any time appeal to the Minister in respect of the imposition of the conditions. Nor did he submit any details in regard to the erection of a house. The three-year period expired in January 1956. After the three-year period had expired he made (on 11 August 1958) an application for permission to build two houses on the site. That application was refused on 29 October 1958. From that refusal there was no appeal. Some years later he made an application for permission to build a house and garage on the site. That application was on 2 October 1964. That application was (on 15 January 1965) refused. He then appealed to the Minister. An inquiry was then held which resulted in a report from an inspector to the effect that the proposed development would result in an unjustified extension outside what was referred to as the ‘village envelope’ for Teston and also that the risks of accident would be increased by the use of the access which was proposed. The appeal was dismissed by the Minister on 22 November 1965. The respondent then claimed that the conditional permission for development granted him, on 8 January 1953, was still in existence in spite of condition 2. That condition he contended was unlawful and void and of no effect. He further contended that the planning permission should nevertheless be held to be subsisting and should be treated as having been granted without condition 2 forming any part of it. So, on 11 March 1966, he began proceedings claiming declarations to that effect. If the contentions are correct it must be immaterial that the ruling of the court was not sought until 13 years after condition 2 was imposed. So also must it be immaterial that there was no appeal to the Minister after the condition was imposed. Different considerations apply if the condition was not void. A condition may be imposed which is intra vires but which may be in terms which the Minister on appeal being made to him in accordance with the regulations might decide to vary.

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The first question in both appeals therefore is whether it was within the lawful powers of the appellants to impose a condition that the permission which was granted should cease to have effect after the expiration of three years (from the date of issue) unless within that time approval had been notified (or signified) to matters referred to (or reserved) in regard to layout, siting, height, design, external appearance and means of access.

A power to impose conditions on the grant of permission to develop land was given by s 14 of the Town and Country Planning Act 1947. I refer to that Act because it was the Act in force at the times of the grants of permission in this case. The local planning authority, if dealing with an application, had to have regard to the provisions (so far as material) of the development plan (if there was one already in existence) and to any other material considerations. If there is a development plan (see s 5) which is approved by the Minister the local planning authority is under obligation (see s 6) to carry out a fresh survey of the area at least once in every five years; some amendment of the plan might result from this. It is relevant to have this in mind when deciding whether any time condition is appropriate on the grant of permission on an outline application.

When dealing with an application for permission to develop land a local planning authority has power (see s 14(1)): (a) to grant permission unconditionally; or (b) to grant permission subject to such conditions as they think fit; or (c) to refuse permission. The language of the section denotes that if conditions are imposed they are conditions attached to the permission. It is provided by s 14(3) that provision may be made by a development order regulating the manner in which applications for permission to develop land are to be dealt with by a local planning authority. It was in the General Development Order 1950(made in exercise of the powers conferred, inter alia, by s 14) that provision was made which allowed for an application to be expressed as an ‘outline application’. The essence of such an application is that the permission which is asked for will be subject to the later approval of the authority in regard to the reserved matters (relating to siting, design, external appearance or means of access). It will often be of the greatest assistance to an applicant to be able to make such an application. He will not want to incur all the expense or employ all the time and energy which will be involved in the preparation of an application other than an outline one if in the result he is not going to get permission at all. In one of the notes on the application form used by the respondents it was stated that an application for permission to erect buildings made as an outline application would be considered as one ‘for approval in principle’. The notes further set out that such approval in principle would be subject to the subsequent submission to the local planning authority of all details (relating to siting and the other matters above referred to) and subject to the approval of those matters by the authority. It is beyond question that such a condition is valid. The General Development Order 1950 makes it obligatory to obtain the approval of the authority with respect to the reserved matters before any development is commenced. So if permission is granted after an outline application the applicant clearly knows that that permission is conditional and that it will not be of use to him until he is able to submit details as to siting and design and the like which are acceptable. It must, of course, be assumed that the authority will act in good faith. They must not misuse their functions so as indirectly and without paying compensation to achieve what would amount to a revocation or modification of a permission already given. Any refusal by them to give approval of details submitted to them can be the subject of an appeal to the Minister. The Minister may overrule the authority.

The notes to which I have referred (which, of course, have no binding effect on a court) further state that the authority’s ‘approval in principle’ would be subject to the submission of the further details within three years. Here, then, is a time condition and the question arises whether any time condition is intra vires when permission is granted on an outline application. It has been seen that in art 5(2) of the

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General Development Order 1950, after the reference to the condition as to the subsequent approval of the authority, there are in brackets the words ‘with or without other conditions’. The authority to impose such ‘other conditions’ must, however, derive, not from the General Development Order 1950, but from s 14(1) of the 1947 Act. The power there given is to impose such conditions as the authority see fit. Subsection (2) gives a power ‘without prejudice to the generality’ of sub-s (1) to impose a condition, inter alia, requiring the discontinuance at the expiration of a specified period of any use of land that is authorised. That would be a condition requiring that a permitted use of land should only be for a limited time. That is something quite different from the condition which is being examined in the present case. We are here concerned to examine whether an outline permission to develop may have some time condition attached to the permission. Thus, if there were a condition attached to the permission which made such permission subject to the submission within three years of the further details as to the reserved matters the effect, if the condition were valid, would be that if no details were submitted within three years the permission would lapse and be at an end. The learned judge ([1968] 3 All ER 197) and Lord Denning M R and Davies LJ ([1969] 1 All ER 601, [1969] 2 QB 332) all thought that such a condition would be valid. I agree with them.

Although the words of s 14(1) are wide, and although in sub-s (2) there is a reference to the ‘generality’ of sub-s (1), it is not every condition that would be valid and sustainable. There must be a planning consideration which warrants its imposition. In Associated Provincial Picture Houses Ltd v Wednesbury Corpn ([1947] 2 All ER 680 at 682, [1948] 1 KB 223 at 228) Lord Greene M R pointed out in the course of his judgment that if an executive discretion is entrusted by Parliament to a body such as the local authority then—

‘… if the nature of the subject-matter and the general interpretation of the Act make it clear that certain matters would not be germane to the matter in question, they must disregard those matters.’

So said Lord Greene ([1947] 2 All ER at 682, 683, [1948] 1 KB at 229):

‘… a person entrusted with a discretion must direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to the matter that he has to consider.’

In his speech in Fawcett Properties Ltd v Buckingham County Council ([1960] 3 All ER 503 at 522, [1961] AC 636 at 684) Lord Jenkins said:

‘The power to impose conditions, though expressed in language apt to confer an absolute discretion on a local planning authority to impose any condition of any kind they may think fit, is, however, conferred as an aid to the performance of the functions assigned to them by the Act as the local planning authority thereby constituted for the area in question. Accordingly, the power must be construed as limited to the imposition of conditions with respect to matters relevant, or reasonably capable of being regarded as relevant, to the implementation of planning policy.’

The authority in the present case were invited to deal with an outline application. They were invited to grant permission to develop land which would be a permission subject to conditions. By s 14(1) the conditions which could be imposed by the authority would be such ‘as they think fit’. Although one condition (ie that

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designated by art 5(2)(i) of the General Development Order 1950) was one which it was obligatory to impose any other conditions would have to be conditions which were relevant to the grant of outline permission. They would have to be ‘germane to the matter in question. In my view, some time considerations may be highly relevant to the grant of outline permission. It may be that some such permissions will not be implemented. They might only be implemented after a long period of time. But it may be of great consequence to an authority, when considering development within an area as a whole or when considering other or later particular applications, to know the extent of permitted development that will actually be carried out. Where applications are not outline applications but are made with full details (and after incurring all the expense necessarily involved in the preparation of such details) there is a reasonable probability that if permission is granted the permitted development will actually be carried out. The authority can reasonably take that into their calculations. It will often be quite essential for an authority to know with some measure of certainty what are the realities in the pattern of development in their area. No mere question of administrative convenience is here involved. Nor do I think that reason (ii) is directed to any such consideration or that condition (ii) should be regarded as so based. If an outline permission is not going to be converted into firmer form then the needs of a community may require that other permissions or permissions to others should be granted.

I am, therefore, of the opinion that a condition attached to an outline permission which makes the permission conditional on plans for approval being submitted within a reasonable period is intra vires s 14(1) of the Act.

The condition now being examined is one, however, which is in different form. It goes beyond what was indicated in the notes to which I have referred. The permission is conditional not only on the submission for approval but on the approval of plans within a stated period; the words and ‘unless within that time approval has been notified’. I see no difference between the use of the word ‘notified’ in the one case and of ‘signified’ in the other. It is to be observed that the condition does not in terms state by whom approval is to be notified or signified.

In order to examine the points which have been debated it will be convenient to consider the two permissions which together relate to the area of 365 acres. Before there can be ‘approval’ of details (ie details relating to layout, siting, height, design and external appearance of proposed buildings and means of access) there must of course be submission of details. It may be that the requirement of approval and not merely of submission was thought to be desirable in order to meet the situation that would arise where someone submitted details within time which, either because they were inadequate or unacceptable, were not approved, and then asserted that he was entitled in perpetuity thereafter and as many times thereafter as he liked to submit alternative details. The importance which the authority attached to the time element is, therefore, emphasised by the adoption of the word ‘approval’. Although there might be willingness to extend time a desire to keep control of time is manifested.

The general attack on the validity of the imposition of time restrictions (other than those denoted in s 14(2)(b)) was in the alternative replaced by an attack on the validity of the form of time restriction which is set out in condition (ii). It was said that the condition is in a form going beyond any condition that could be imposed under s 14 or under art 5 of the General Development Order 1950, and also that it is in a form which could involve revocation without compensation. It was said that the condition involves a restriction on the right of appeal. It was said that the condition is in a form which takes power of compliance away from or outside the control of the grantee. Some of these contentions are interrelated.

It is of passing interest to note that in Hamilton v West Sussex County Council the

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case proceeded on the basis of the validity of the grant of an outline permission subject to a condition that the permission was to become null and void unless satisfactory plans and elevations giving details of the design and siting of the building were submitted to and approved by the local planning authority within two years.

Before an application for outline permission is made thought will in the nature of things have been given to the scope and nature of a project which it is desired to carry out. When an application is made it is necessary to submit such written information as to the proposals as will be sufficient to enable the planning authority to assess their merits from a planning point of view. In the present case that was done in March 1952. When outline permission was granted in October 1952, the time condition concerning approval of details then began to run. To the uninitiated or perhaps, to those hopefully waiting for a house in which to live, it might well seem that three years would be time enough and to spare for the preparation thereafter of the details of what a developer already had in mind and for their examination and (if acceptable) approval by the planning authority. But we are told that in practice and in experience the wheels of planning (in reference to such a housing project as has given rise to this litigation) cannot be hastened. The attack on condition (ii) as it developed was, however, not directed to the period of three years. The attack would equally be made, so it was stated, had the period been longer or much longer. It is to be remembered also that there could have been an appeal to the Minister and he could have been asked to substitute a period of time longer than three years. Those with practical knowledge of the skills of planning experts and of the complexities that may be involved in drawing up details of reserved matters would have known in 1952 whether it was appropriate to expect that in the normal course of things there would be approval within three years. If regard is paid to practice it is to be noted that by agreement a period of three years in the present case extended to a period of ten.

What is said is that if details are submitted well within the three-year period the authority for one reason or another might take a long time to consider them and the period might elapse before approval was given. The delay would not, it is said, have been the fault of the grantee or one which it would have been in his power to avoid. This point calls for consideration even though it would seem to be inconceivable that any planning authority having expressed their approval would then assert, if their approval were given after the period, that condition (ii) would bring the result that permission to develop no longer existed. What is further said is that if the authority give notification just before the end of the three years that they do not approve the details submitted, the grantee may be denied his right to appeal within the time permitted to him. It is further said that if he appealed to the Minister within the three-year period the Minister might not be able to give a decision within the period, so that there could not be approval within the time. It was solely on the limited ground that no provision had been made to cover the time required for an appeal to the Minister that the learned judge ([1968] 3 All ER 197) held that condition (ii) was ultra vires and void.

Where outline permission for the erection of buildings is granted under the provisions of art 5 of the General Development Order 1950, and where thereafter (see art 5(3)) there is an application for approval, the authority must give notice of their decision within two months (see art 5(8)). There could be an agreement in writing to extend that period. A grantee of permission would be under no obligation to agree and would, in such a case as the present if extension of time was being negotiated, probably prefer to agree to an extension of the three-year period. If the authority fail to give notice of their decision within the two-month period then (see s 16 of the 1947 Act and art 11 of the General Development Order 1950), there may be appeal (within one month) to the Minister; it will be an appeal on the basis that, and as

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though, approval had been refused and as though notification of refusal had been made within the two-month period.

It is to be observed that nowhere in the conditions which were imposed in this case was there any limitation expressly imposed on the right of appeal. But, unless an extension of the three-year period was by agreement arranged, the grantee would know that to safeguard himself he should submit his details of the reserved matters some two or three months before the end of the three-year period. That would allow for the full two-month period in which the authority are to give or to fail to give their decision and the month (if he desired so long) in which he could appeal. All this would be entirely within the control of the grantee. He could ensure that an appeal (if one becomes necessary) is before the Minister within the three-year period. On appeal (see s 16(3) of the 1947 Act) the Minister may allow or dismiss the appeal or may reverse or vary any part of the decision of the authority. There is no time limit imposed on the Minister. If the Minister decided that the planning authority ought to have given their approval in regard to the reserved matters but if the Minister only so decided at a date after the three-year period I find it hard to imagine that any authority would say that because they, the authority, had not notified their approval within the three years then, notwithstanding that the Minister had held that they should have done so, the permission was nevertheless at an end. Yet it is on such a thesis that ultimately the argument of the respondents is based. An argument which for its success demands a close scrutiny of words, involves also that public authorities must be alert to see whether words can be given a meaning which would halt all action. It is the respondents who are suggesting lines of reasoning and courses of action by planning authorities which the latter would be most unlikely ever to favour or to adopt.

The argument makes it necessary to turn to a closer examination of condition (ii) and of its words ‘unless within that time approval has been notified to those matters referred to in condition (i) above’. Whose approval is being referred to? Condition (ii) refers to and follows on and is closely linked with condition (i). The ‘matters referred to in condition (i)’ are the details which on an outline application did not have to be supplied but which in accordance with condition (i) had to ‘be submitted to and approved by the Local Planning Authority before any works are begun’. It seems clear, therefore, that the approval in condition (ii) is the same approval as is referred to in condition (i)—which is expressly stated to be the approval of the local planning authority. So as a matter of construction the approval referred to in condition (ii) is the approval of the local planning authority. The word ‘notified’ denotes a notification of the local planning authority (see s 16(1) of the 1947 Act). Condition (ii) is, therefore, really an addition to condition (i); it is an addition by which a time limit is added.

Reverting to condition (i), which is in no way challenged, it is seen that details of the reserved matters must be ‘submitted to and approved by the Local Planning Authority before any works are begun’. That condition is imposed because it must be imposed. See art 5(2)(i) of the General Development Order 1950, set out above), ‘the approval of the authority shall be required with respect to the matters reserved in the permission before any development is commenced’. The ‘authority’ is clearly the ‘local planning authority’ earlier referred to in the article. What, then, is the position if, after submission to them of the details, the authority do not approve—but if there is an appeal to the Minister and if the Minister allows the appeal? The process of reasoning, based on the ardent literalism which the respondents wish to apply to condition (ii), must have the effect that if the authority wrongly fail to give their approval then condition (i) cannot be satisfied. Condition (i) expressly refers to approval by the authority. If the authority have refused approval then no works can be begun. Hence there is complete frustration.

It is manifest, however, that this cannot be right. The General Development Order 1950, which requires that condition (i) be imposed, makes provision (see art 11)

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for appeal to the Minister. It would not be sensible to hold that although there is provision for appeal any success that an appeal might seem to yield would all be illusory and in vain. When, in the scheme which is embodied in statute and authorised by the development order, appeals are provided for, it must have been the intention that appeals could be effectively pursued. In Murray v Inland Revenue Comrs ([1918] AC 541 at 553) Lord Dunedin said:

‘It is our duty to make what we can of statutes, knowing they are meant to be operative, and not inept, and nothing short of impossibility should in my judgment allow a judge to declare a statute unworkable.’

The same thoughts, I venture to think, guided Viscount Simon LC when in Nokes v Doncaster Amalgamated Colliers Ltd ([1940] 3 All ER 549 at 554, [1940] AC 1014 at 1022), he said:

‘… if the choice is between two interpretations the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility, and should rather accept the bolder construction, based on the view that Parliament would legislate only for the purpose of bringing about an effective result.’

In R v Justices of County of London and London County Council ([1893] 2 QB 476 at 488) Lord Esher MR referred to the necessity of reading enactments—‘… subject to their not being made absurd by matters which never could have been within the calculation or consideration of the legislature … ’

Here, then, we have a statutory instrument requiring that there must be a condition that the approval of the local planning authority shall be required with respect to the reserved matters before any development is commenced. The same statutory instrument provides for an appeal to the Minister. As a matter of common sense and to bring about an effective result I would consider that development could be commenced if in spite of a refusal of approval by the local planning authority the Minister held on appeal that there should not have been a refusal. This is not a matter of filling in gaps in legislative provisions. It is merely a matter of ensuring that each of two provisions is to have rational effect. So in the present case the effect of condition (i) is that no works are to be begun until details have been submitted to and approved by the local planning authority. The effect of adding provision for an appeal is that no works are to be begun until details have been submitted to and approved by the local planning authority or until it is held on appeal that the details ought to have been approved.

It seems to me that similar reasoning should apply to condition (ii) which merely follows on and supplements condition (i) by the addition of a time limit. The approval in condition (ii) is the same approval as is referred to in condition (i). Just as the procedure for appeal must be made to work in the case of condition (i), so must it be made to work in regard to its supplementing condition. By condition (ii) the permission ceases to have effect after the expiration of three years unless within that time approval has been notified by the local planning authority to the matters referred to in condition (i). The effect of having provision for appeal is that the permission ceases to have effect after the expiration of three years unless within that time approval has been notified by the local planning authority or unless it is held on appeal that within that time approval should have been notified by the local planning authority to the matters referred to in condition (i).

I consider, therefore, in agreement with the result reached by Lord Denning MR ([1969] 1 All ER at 612, 613, [1967] 2 QB at 355), that condition (ii) was not void. I need not deal more specifically with the second

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appeal for it is agreed that it will be resolved in the same way as the first. In each action the respondents claimed a declaration that the relevant permission subsisted but did so as though condition (ii) has never formed any part of it. It is common ground that on the facts the permissions no longer subsist if condition (ii) was not void. I turn, therefore, to consider whether, on the basis (contrary to my view) that condition (ii) was void, the permissions nevertheless subsist.

It appears that it was the practice of the local planning authority to attach condition (ii) when outline permissions were granted. It was suggested that this indicated a failure to exercise discretion. Rather, in my view, does it indicate that it was thought to be most desirable to keep control of the timing of development. For the reasons which I have earlier set out it seems to me that development may be impeded and purposeful planning may be thwarted if without restrictions of time there are outstanding permissions which are permissions in principle but which give no prospect of resulting in development. What is potential in regard to some land could defeat what could be practical and urgent in regard to other land.

There might be cases where permission is granted and where some conditions, perhaps unimportant or perhaps incidental, are merely superimposed. In such cases if the conditions are held to be void the permission might be held to endure just as a tree might survive with one or two of its branches pruned or lopped off. It will be otherwise if some condition is seen to be a part, so to speak, of the structure of the permission so that if the condition is hewn away the permission falls away with it. In his judgment in Hall & Co Ltd v Shoreham-by-Sea Urban District Council ([1964] 1 All ER 1 at 10, [1964] 1 WLR 240 at 252) Willmer LJ pointed to the contrast between a case in which one or two trivial conditions might be held to be ultra vires (where it would be difficult to justify saying that the whole permission failed) and a case in which conditions are ‘fundamental to the whole of the planning permission’ in which case the planning permission would fail. In the same case Pearson LJ ([1964] 1 All ER at 18, [1964] 1 WLR at 261) differentiated between conditions which are ‘essential, or at least important’, and those which are ‘trivial or at least unimportant’.

On this issue I am in agreement with the conclusion reached by the learned judge ([1968] 3 All ER 197) and by Lord Denning MR ([1969] 1 All ER 601, [1969] 2 QB 332). If in 1952 and 1953 the points had occurred to the respondents and if they or anyone else had persuaded the appellants that condition (ii) was invalid all the indications are, not that the appellants would have abandoned a time condition, but that they would have insisted on one while so phrasing or redrafting its wording as to meet the somewhat technical points that have now for so many days claimed the attention of the courts. I agree with the learned judge ([1968] 3 All ER 197) and with Lord Denning MR ([1969] 1 All ER 601, [1969] 2 QB 332) that the appellants considered that a time condition was of fundamental importance and I agree that if condition (ii) is void it cannot be deleted so as to leave the permission (subject to the other conditions) still subsisting.

For those reasons which I have given I would on both points allow the appeals.

LORD GUEST. My Lords, the principal question in these appeals is whether a condition attached to a grant of outline planning permission providing that the planning permission shall lapse if details of the reserved matters are not approved within three years has been validly imposed by the local planning authority.

‘Outline permission’ is a creature of the Town and Country Planning General Development Order 1930e, which by art 5(2) provides as follows:

‘Where an applicant so desires, an application, expressed to be an outline application, may be made under the preceding paragraph for permission for the

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erection of any buildings subject to the subsequent approval of the authority with respect to any matters relating to the siting, design or external appearance of the buildings, or the means of access thereto, in which case particulars and plans in regard to those matters shall not be required and permission may be granted subject as aforesaid (with or without other conditions) or refused, provided that:—

‘(i) where such permission is granted, it shall be expressed to be granted under this paragraph on an outline application and the approval of the authority shall be required with respect to the matters reserved in the permission before any development is commenced;’

‘Outline permission’ as such finds no place in the Town and Country Planning Act 1947. It first appears in its statutory form in the Town and Country Planning Act 1968, s 66(1), which provides as follows:

‘In this section and section 65 above, “outline planning permission” means planning permission granted, in accordance with the provisions of a development order, with the reservation for subsequent approval by the local planning authority or the Minister of matters (referred to in this section as “reserved matters”) not particularised in the application.’

In the Kingsway case, which I will take as typical, outline planning permission was granted subject to condition (i) in the following terms:

‘(i) That details relating to layout, siting, height, design and external appearance of the proposed buildings; and means of access thereto, shall be submitted to and approved by the Local Planning Authority before any works are begun;’

and condition (ii) in the following terms:

‘(ii) the permission shall cease to have effect after the expiration of three years unless within that time approval has been notified to those matters referred to in condition (i) above;’

The conditions in the Kenworthy case are not in substantially different terms. The reasons given for the imposition of these conditions were as follows:

‘1. Full details have not yet been submitted 2. In order to prevent the accumulation of permission in respect of which no plans have yet been submitted … ’

The necessity to apply for planning permission for any development (as therein defined) is contained in s 12 of the 1974 Act. Section 14(1) provides as follows:

‘Subject to the provisions of this and the next following section, where application is made to the local planning authority for permission to develop land, that authority may grant permission either unconditionally or subject to such conditions as they think fit, or may refuse permission; and in dealing with any such application the local planning authority shall have regard to the provisions of the development plan, so far as material thereto, and to any other material considerations.’

Appeals to the Minister against the planning authority’s decision are dealt with under s 16. An appeal must be lodged within 28 days of the notification of the planning authority’s decision. By s 16(3) and art 5(8) of the General Development Order 1950, if the planning authority do not deal with the application for approval within two months of the date of the application, then the applicant can treat it as a refusal and he may appeal to the Minister as under the terms of s 16.

The respondents, who have no objection to condition (i), maintain that condition (ii) which they categorise as a ‘time condition’ was ultra vires of the appellants’ powers under the Act. It is contended that all time conditions on outline permission, apart

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from that provided in s 14(2)(b), are invalid. In my view, the condition referred to in s 14(2)(b) is not a time condition at all. It merely requires the removal of the buildings at the end of a specified period. In any case s 14(2) is ‘Without prejudice to the generality’ of s 14(1) which itself is in the widest terms. The argument proceeds on the basis that once outline planning permission has been granted only such procedural conditions can be imposed as are authorised by art 5(2) of the General Development Order 1950; and that it was incompetent by a side wind to effect what was really a revocation order which could only be validly imposed under s 27 of the 1947 Act with the consequent payment of compensation.

In my view, these objections are not well founded. The power under s 14(1) is to impose such conditions as the planning authority think fit. The conditions may be imposed on permission to develop but they need not relate specifically to the manner and time of development. In imposing the conditions the planning authority are obliged to have regard to the development plan so far as material and any other material considerations. So long as the condition relates to the implementation of planning policy then, in my view, the condition is valid.

The power of the planning authority to impose conditions on outline permission is not, in my view, limited to the matters referred to in art 5(2) of the General Development Order 1950. That article specifically says that the conditions therein provided may be ‘with or without other conditions’.

In my view, it is quite impossible to say that time conditions do not relate to the implementation of planning policy. It may be very necessary for the planning authority, in considering the planning of a whole area, to know what outline permissions are extant and what outline permissions have lapsed. It is not unimportant to note that the provisions of the Planning Acts subsequent to 1947 appear to proceed on the basis that certain time conditions are valid, eg the provisions of s 41(3) of the Caravan Sites and Control of Development Act 1960, and ss 66 to 68 of the Town and Country Planning Act 1968, make it plain that time conditions as to the submission of plans or as to the commencement of development were considered valid. There is little difference in principle between such conditions and a time condition as to the approval of plans. My view accordingly is that the general argument for the respondents that time conditions can only be validly imposed under s 14(3) of the 1947 Act is unsound and ought to be rejected.

I next proceed to consider whether this particular condition, that the permission shall cease to have effect after the expiry of three years, unless within that time approval has been notified as to the matters reserved under condition (i), is ultra vires. The respondents contend that this condition was ultra vires in that it cuts down the applicant’s right of appeal to the Minister against the refusal of the planning authority to give approval to the reserved matters or their failure to deal timeously with these matters. If, of course, the applicant’s right of appeal to the Minister was necessarily cut down by the imposition of condition (i) I should have unhesitatingly held it to be ultra vires; but I do not think this is so. Neither condition (i) nor condition (ii) makes any reference to appeal to the Minister, but it must be implicit in condition (i) that the applicant’s right of appeal to the Minister is not excluded. To exclude it would be in plain defiance of s 16 of the 1947 Act and art 2 of the General Development Order 1950. For the same reasons it appears to me that the applicant’s right of appeal to the Minister must equally be preserved under condition (ii). The planning authority could never be heard to say that condition (ii) had not been complied with because they had not approved of the plans, although a subsequent appeal to the Minister had been successful and the Minister had held that they ought to have approved. This is on the basis that the appeal is decided by the Minister within the period of three years. So the only difficulty arises in relation to an appeal which is pending at the end of three years, but has not yet been decided. The applicant is put on notice on the imposition of condition (ii) that permission will expire at the end of three years if the plans are not by then approved subject to his right of appeal to

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the Minister. If the applicant wishes to preserve his right of appeal, he would realise that his appeal must be lodged before the expiration of the three years. I see nothing unreasonable in a condition which requires the applicant to take timeous steps to secure that end. He must, therefore, lodge his plans for approval at least three months before the expiry of the three years—two months to allow the planning authority to deal with them under art 5(8) of the General Development Order 1950 and one month within which to appeal to the Minister under s 16 of the 1947 Act. The applicant could, of course, always obtain extension of these time limits by agreement with the planning authority or the Minister as the case may be. On a proper construction of condition (ii) it is implicit, in my view, that the applicant should act reasonably in the matter having regard to the preservation of his rights under the Act. The only problem, therefore, concerns a competent appeal to the Minister which is pending at the expiry of the three years but which has not yet been decided. It is argued that, by reason of the terms of condition (ii) such an appeal would become incompetent after the expiry of three years because the permission would by that time have lapsed and the Minister’s jurisdiction would have terminated. I do not agree. I should have thought on principle that an appeal pending against either the imposition of the three-year condition or against a refusal of the planning authority to deal with or approve of the plans would continue to be competent notwithstanding the expiry of the three years. I am confirmed in my view by the authorities cited by counsel for the appellants, in particular Davis v Miller ([1956] 3 All ER 109 at 112, [1956] 1 WLR 1013 at 1018, 1019) per Lord Goddard CJ.

Accordingly, approaching the matter from the point of whether condition (ii) is unreasonable I have reached the conclusion that it is not. I have already expressed the view that it is not ultra vires of the Act provided the applicant acts reasonably, having regard to the preservation of his rights. There is no necessity for his rights of appeal under the Act to be cut down.

I have had the advantage of reading the speech of my noble and learned friend, Lord Morris of Borth-y-Gest. For the reasons given by him and also for those which I have endeavoured to express, my view is that condition (ii) is valid. I prefer on the whole the judgment of Lord Denning MR in the Court of Appeal ([1969] 1All ER 601, [1969] 2 QB 332) to that of the majority.

On the view that the condition is valid it is strictly unnecessary for me to decide whether the condition is separable, but as your Lordships are not in agreement on the principal question it becomes necessary for me to express my view on this matter. I have not found it an easy question. It would, in my view, be a very surprising result for the law to reach, that although the planning authority had given outline planning permission which was to expire at the end of three years, unless details were approved by them within that time, yet because a time limit was ultra vires unlimited planning permission remained to be exercised at any time in future on the approval of the reserved matters. This may, of course, be a result of the authorities but I should not, without considerable hesitation, reach such a conclusion. Planning permission is an animal sui generis not to be compared with licences and similar permissions. It seems to me that planning permission is entire. If a condition as to its grant flies off owing to its invalidity, the whole planning permission must go; and it is impossible to separate the outline permission without the time limit from the grant. The good part is so inextricably mixed up with the bad that the whole must go (see Pigot’s Case ((1614) 77 ER 1177 at 1179, n) and McDonald v McDonald’s Trustees (1875 2 SC (HL) 125 at 132) per Lord Cairns LC). I agree with the observations of Hodson LJ in Pyx Granite Co Ltd v Ministry of Housing and Local Government ([1958] 1 All ER 625 at 637, [1958] 1 QB 544 at 579). I agree therefore for these reasons and also for the reasons given by my noble and

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learned friend, Lord Morris of Borth-y-Gest, that if the condition is invalid the invalid part cannot be separated from the permission and the whole permission must go.

For these reasons I would allow these appeals.

LORD UPJOHN. My Lords, these conjoined appeals raise questions of some general importance to would-be developers of land who seek planning permission, particularly outline planning permission, and to local planning authorities, as to the validity of conditions as to time within which the permission must be exercised and, if not valid, as to the severability of such conditions from the main permission.

In the case of the first appeal the predecessor in title of the respondents, Kingsway Investment (Kent) Ltd (Kingsway) applied for outline planning permission to develop 365 acres of the Trosley Towers Estate near Wrotham. Two applications were necessary as the land lay within the area of two rural district councils and consequently planning permission was granted by the appellants in two documents both dated 14 October 1952, and so far as relevant in identical terms. The grant was in these terms:

‘… [the appellants] the local planning authority under the Town and Country Planning Act, 1947, [have] GRANTED PERMISSION for development of land … in accordance with the particulars supplied with your outline application for permission dated the twenty-fifth day of March, 1952, submitted by you to [the appellants] … SUBJECT TO THE CONDITIONS specified hereunder:—

‘(i) That details relating to layout, siting, height, design and external appearance of the proposed buildings; and means of access thereto, shall be submitted to and approved by the Local Planning Authority before any works are begun;

‘(ii) the permission shall cease to have effect after the expiration of three years unless within that time approval has been notified to those matters referred to in condition (i) above.’

Condition (iii) is irrelevant but, as statutory authority required, the grant of permission stated that the grounds for the imposition of such conditions were (so far as relevant):

‘(i) No such details have been submitted;

‘(ii) in order to prevent the accumulation of permissions in respect of which no details have been submitted … ’

In the Kenworthy case, on 24 November 1952, the respondent Mr Kenworthy applied for outline planning permission to develop one house on an acre of land that he owned at Teston near Maidstone and, on 8 January 1953, planning permission was granted in accordance with his outline application subject to conditions, the first being in substance the same as condition (i) in the Kingsway case but condition 2 was slightly different; it was in these terms:

‘2. The permission ceasing to have effect after the expiration of 3 years from the date of issue unless within that time approval has been signified to those matters reserved under Condition 1 above.’

The reasons given for the imposition of these conditions were in substance the same as in the Kingsway case.

The subsequent history of the Kingsway case was lengthy and complex; many extensions of time for performance of the conditions were agreed but ultimately time expired on 26 September 1962. Later, in May 1963, planning permission was granted to Croudace Ltd to develop 165 of the 365 acres but as the issue between the parties depends solely on the effect of the planning permission granted on 14 October 1952, I need not pursue these matters further. It is agreed that the Kenworthy case stands or falls with the Kingsway case.

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My Lords, the questions for your Lordships are first, whether condition (ii) is invalid because the permission is expressed to cease if approval is not granted within three years and, secondly, if so, is that condition severable from the planning permission so that the permission stands without any time limit for its performance, or does the invalidity of the time limit bring down and invalidate the whole permission?

To answer the first of these questions I must set out the relevant sections of the Town and Country Planning Act 1947. The fundamental section which empowers a local planning authority to impose conditions is s 14(1), which is in these terms:

‘Subject to the provisions of this and the next following section, where application is made to the local planning authority for permission to develop land, the authority may grant permission either unconditionally or subject to such conditions as they think fit, or may refuse permission; and in dealing with any such application the local planning authority shall have regard to the provisions of the development plan, so far as material thereto, and to any other material considerations.’

Section 16 deals with appeals to the Minister. Subsection (1), so far as relevant, is in these terms:

‘Where application is made under this Part of this Act to a local planning authority for permission to develop land, or for any approval of that authority required under a development order, and that permission or approval is refused by that authority, or is granted by them subject to conditions, then if the applicant is aggrieved by their decision he may by notice served within the time, not being less than twenty-eight days from the receipt of notification of their decision, and in the manner prescribed by the development order, appeal to the Minister.’

Subsection (3) provides in effect that unless the local planning authority gives notice of their decision on any application for permission within the period prescribed by the development order or any extended period as may be agreed then the provisions of sub-s (1) shall apply as if the permission had been refused by the local planning authority and notification of their decision had been received by the applicant at the expiration of the prescribed period or any agreed extended period.

Under the powers conferred on the Minister by the 1947 Act he made the Town and Country Planning General Development Order 1950f the validity of which is not in issue.

The 1947 Act nowhere mentioned and ‘outline’ application and the right to make such an application was granted by art 5(2) of the 1950 order, and provided that such an application might be granted but subject, among other conditions, that:

‘(i) where such permission is granted, it shall be expressed to be granted under this paragraph on an outline application and the approval of the authority shall be required with respect to the matters reserved in the permission before any development is commenced.’

Article 5(8) provided that for the relevant purpose the local planning authority must give notice of its decision within two months from date of receipt of the application or such extended period as might be agreed, so that for the purposes of s 16(3) of the 1947 Act the local authority was deemed to have refused permission if it did not give notice within that period, and then by art 11 the applicant is entitled to appeal to the Minister within one month thereafter.

The principles on which the validity of a condition attached to a planning permission is to be tested is not in doubt. As Lord Denning said in Fawcett Properties Ltd v Buckingham County Council ([1960] 3 All ER 503 at 518, [1961] AC 636 at 679) planning conditions are on much the same footing

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as byelaws to which they are so closely akin. Your Lordships were naturally referred to Kruse v Johnson and to the well-known judgment of Lord Russell of Killowen ([1898] 2 QB at 99, [1895–99] All ER Rep at 110). I do not cite from it but note in passing that in his view byelaws should be benevolently interpreted, and I accept that conditions annexed to a planning permission should be interpreted in the same spirit. Furthermore, it is not in doubt that a grant of outline planning permission is a grant of permission for the relevant purposes of the Act and the 1950 order.

My Lords, these principles have been discussed in subsequent authorities, notably by Lord Greene M R in Associated Provincial Picture Houses Ltd v Wednesbury Corpn and in a number of opinions in this House in Fawcett’s case ([1960] 3 All ER 503, [1961] AC 636). These principles were felicitiously summarised in that case by Lord Jenkins ([1960] 3 All ER at 522, [1961] AC at 684):

‘The power to impose conditions, though expressed in language apt to confer an absolute discretion on a local planning authority to impose any condition of any kind they may think fit, is, however, conferred as an aid to the performance of the functions assigned to them by the Act as the local planning authority thereby constituted for the area in question. Accordingly the power must be construed as limited to the imposition of conditions with respect to matters relevant, or reasonable capable of being regarded as relevant, to the implementation of planning policy.’

Lord Jenkins continued ([1960] 3 All ER at 522, [1961] AC at 685):

‘This does not mean that the wisdom or merits of a condition amused in any given case can be made the subject of an appeal to the court at the instance of a person objecting to the condition.’

He then quoted ([1960] 3 All ER at 522, [1961] AC at 685) from the headnote to the Wednesday Corporation case ([1948] 1 KB at 244):

‘The court cannot interfere as an appellate authority to override a decision of such an authority, but only as a judicial authority concerned to see whether it has contravened the law by acting in excess of its power.’

The first question is whether a time condition can validly be annexed to a grant of outline planning permission and, in agreement with all of your Lordships, I am of opinion that it can. It was so held by Harman J in Re 42–48 Paddington Street and 62–72 Chiltern Street, St Marylebone, Marks & Spencer Ltd v London County Council, who was upheld on this point unanimously in the Court of Appeal ([1952] 1 All ER 1150, [1952] Ch 549) by Sir Raymond Evershed M R, Jenkins and Morris LJJ.

The reason is twofold: in the first place, under s 6 of the 1947 Act it is the duty of the local planning authority after the preparation of its first development plan, every five years to carry out a fresh survey of that area and to submit to the Minister a report of the survey together with proposals for any alterations or additions which appear to them to be required. Clearly it would be quite impracticable to make such subsequent surveys a useful exercise if some part of the relevant area is subject to outline planning permission which may or may not be exercised in the foreseeable future; in this connection it is, I think, material to note that the practice has grown up whereby in many cases an outline application is made and granted although the applicant is only intending to enhance the value of his land on a sale in the future

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and is not himself proposing to carry out the development. But there is a second reason, that in some cases, at all events, the annexure of a time condition is made necessary by reason of the fact that in a particular area only a limited development ought in the interests of planning policy to be permitted and if a developer does not exercise his permission then it should cease to be effective and given to another. I regret that I am unable to agree with Winn LJ ([1969] 1 All ER at 620, [1969] 2 QB at 364) who took the view that a time condition can only be validly imposed in cases falling within s 14(2)(b) of the 1947 Act.

But what is a valid time condition must depend on the circumstances of each particular case. Thus, there can be no objection to the imposition of a reasonable time limit for the submission of detailed plans after a grant of outline planning permission, for compliance with that depends solely on the action of the applicant. What is reasonable must depend, among other things, on the area and amount of development, its importance in relation to the locality, and so on. On that matter the test is that laid down in the Wednesbury case: was the time limited for submission of plans so unreasonably short that no reasonable authority could properly have imposed such a short time? In this appeal your Lordships are not concerned with that, for no one has suggested that even in relation to the Kingsway application three years is too short. Further, no one doubts that condition (i) is valid; it is imposed on grantor and grantee of the permission by the terms of art 5(2)(i) of the 1950 order. In this case the question is whether the appellants have exceeded their powers in this sense that by condition (ii) they have purported to limit the statutory rights conferred by the 1947 Act and the 1950 order on the respondents in relation to their rights of appeal to the Minister. If so, that condition is necessarily invalid and ultra vires the appellants, for neither the Act nor the 1950 order conferred any power on a planning authority to limit in any way the rights of appeal to the Minister; this is not a matter of reasonableness but of excess of jurisdiction.

Condition (ii) in the Kingsway case as a matter of construction plainly limits the effectiveness of the permission to the submission (these words must plainly be implied) and approval of the details referred to in condition (i). I incline to the view that the approval must in the context be the approval of the local planning authority. On that footing it seems to me clear that the right of the applicant to appeal is plainly limited, for construing the condition literally there is no obligation on the applicant to submit his plans until just before the expiry of the three years and then the refusal of the authority actual or deemed (by virtue of s 16(3)) might not be given within three years from the application and his right of appeal might not arise until after the expiry of that period when by its terms the permission has come to an end, so that there is nothing against which he can appeal.

But it is argued that interpreting the terms of the permission benevolently, as I agree they must be, the applicant is put on notice that he must submit his details under condition (i) three months or at least two months before the expiry of the three years so that he can appeal from the authority’s actual or deemed refusal before the expiry of the three years. Then if the applicant does appeal to the Minister within the three-year period but the Minister does not make his decision with in that period is his right of appeal preserved beyond that period? This is, I think, a difficult question which was not very fully argued before your Lordships although it was suggested that Davis v Miller was some authority in favour of the view that it would be, but the point was not expressly taken there. If not so preserved that seems to me fatal to the validity of the clause for, in my opinion, it is no answer as was contended before your Lordships that a Minister acting reasonably must as a matter of course extend the right of the applicant to appeal out of the time limited by condition (ii); for that converts an absolute right of appeal into a right of appeal at the discretion of the Minister and must as a matter of law, in my opinion, be fatal to validity.

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But assuming that the right of appeal once notice of appeal has been given within the three years is thereby preserved that does not, in my opinion, save the validity of the clause. True the applicant ought to put in his detailed plans well before the expiry of the three years, but there is no obligation on him to do so by the terms of the condition; subsequent events after the grant of outline permission may without fault on the part of the applicant make it difficult to put them in in good time and then approval within the specified time depends on the good offices of the planning authority; again, the fact that they may invite agreement of the applicant to an extension of time cannot affect his legal rights. In my opinion, a clause which makes the grant of planning permission cease to have effect on an act which may be outside the control of the applicant is bad for it may affect his rights of appeal and makes them dependent on the acts of the planning authority. I agree in this respect with the judgment of Davies LJ ([1969] 1 All ER at 618, [1969] 2 QB at 262) in the court below. I note, too, that in his circular dated 6 February 1968, the Minister in effect took the same view.

It was suggested that some words could be read in by way of necessary implication to give business efficacy to the condition, but the words suggested do not seem to me sufficient for the purpose and I think the words in the condition must be read in their ordinary meaning. Alternatively it was said, if submission of plans be implied in condition (ii) then ‘the approval’ could be struck out, but that does complete violence to the actual words used in the condition.

My Lords, as I have said, the Kenworthy case has throughout been treated as standing or falling with the Kingsway case but it is in fact an a fortiori case, for the approval referred to in condition (ii) there cannot, as a matter of construction, be read as the approval of the appellants but must necessarily include the approval of the Minister where an appeal is made to him and as he may take as long as he pleases to determine any appeal, so the condition is therefore quite plainly bad.

In my opinion, if a local planning authority is not content with the imposition of a time limit as to the submission of plans but desires to refer to approval of plans, then the condition will require substantial redrafting so as to make the right of appeal depend in no wise on any act to be performed by the planning authority within any given time. For these reasons I am of opinion condition (ii) is ultra vires the appellants as it may restrict the statutory rights of appeal conferred on the respondents. So I must turn to the question of severability of the offending condition from the rest of the grant of permission. This is a very difficult question and perhaps lacks any substantial body of settled judicial authority. The only contract cases where this question has been fully developed are contracts in restraint of trade and afford no guidance for they are sui generis. The byelaw cases are helpful for, as I have mentioned earlier, they are closely analogous to conditions annexed to planning permission and so, too, are the authorities on conditions imposed by the many statutory bodies.

I find the observations of Devlin J in Potato Marketing Board v Merricks helpful although of the most general character, and the facts of the case were very different. The marketing board sent out a questionnaire demanding information on a number of points to which the defendant objected and the judge held that his objection was in law good in part. The question was whether these demands were severable. Devlin J said ([1958] 2 All ER at 547, [1958] 2 QB at 333):

‘I must, therefore, find the right answer as a matter of principle, and I think that the principle to be applied is that which is applied to all classes of documents which are partly good and partly bad because, for example, they are in part illegal or ultra vires. In all these cases, the question to be asked is whether the bad part can be effectively severed … ’

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By effectively severed I think that the learned judge meant effectively severed without making nonsense of that which remained. Certainly this has been the interpretation placed on the principle in the bylaw cases. See for example R v Lundie. Sir Alexander Cockburn CJ said ((1862) 31 LJMC at 160):

‘The doctrine is established that if a by-law can be divided, it may be valid as to so much as is good. Several cases have been brought to our notice, but each by-law must stand or fall upon its own merits.’

Other cases show that where possible the invalid conditions will be rejected leaving that which is valid standing and effective. See by way of example, Rossi v Edinburgh Corpn; Theatre de Luxe (Halifax) Ltd v Gledhill (overruled on another point in the Wednesbury case) and Ellis v Dubowski.

There have been recent cases under the 1947 Act where the invalid condition was held to bring down the whole permission. In the first—Pyx Granite Co Ltd v Ministry of Housing and Local Government ([1958] 1 All ER 625 at 637, [1958] 1 QB 544 at 579) Hodson LJ said it was ‘impossible to mutilate the Minister’s decision by removing one or more of the conditions’. Another example was Hall & Co Ltd v Shoreham-by-Sea Urban District Council where applying the observations of Hodson LJ in the Pyx Granite case ([1958] 1 All ER 625 at 637, [1958] 1 QB 544 at 579) the Court of Appeal held that the invalid condition brought down the whole permission. Pearson LJ ([1964] 1 All ER at 18, [1964] 1 WLR at 261) thought that only unimportant or trivial conditions could be rejected, leaving the remainder standing.

In these two cases (clearly correctly decided on this point), however, it is of cardinal importance to note that the invalid conditions went to the root of the planning permission itself and severely restricted the permission applied for, and the observations of Hodson and Pearson LJJ respectively must be read in that light. But a condition as to time does not go to the root of the permission itself; it is purely collateral and could be altered without affecting the actual grant of the permission.

In complete contract to the Pyx Granite and Shoreham cases, the condition as to time in this case formed no component part of the permission itself. Lord Denning MR ([1969] 1 All ER at 612, [1969] 2 QB at 354) and Lyell J ([1968] 3 All ER at 205) really tested this question of severance by posing the question would the appellants have granted the outline permission in perpetuity, and the plain answer to that is of course not. With all respect, that seems to me to be the wrong question to pose for the purpose of this test. That is only stating a possible effect of invalidity; it certainly cannot be a test of severability because that prejudges the matter. The correct question is do you realise that the time condition as drawn is invalid, to which the answer would be: that is my mistake, I must alter it as I only want to impose a reasonable limitation as to time for the purpose of my planning policy. Unfortunately the courts have no power to substitute a reasonable time limit.

By way of contrast, in the Pyx Granite and Shoreham cases I would suppose that the proper question is, do you realise that those conditions are invalid, to which the answer would have been: but they are absolutely essential restrictions on my grant

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of permission, and if invalid the applicant cannot have any permission to do what he wants.

Counsel for the respondents adopted as part of his argument the powerful submissions of Mr Ramsay Willis in the Pyx Granite case ([1960] AC at 280, 281) when it went to your Lordships’ House against a holding of total invalidity. It was, however, unnecessary for this House to rule on this point.

It would, in my opinion, be most unjust, unless there is some compelling principle of law which makes it necessary to impose such injustice, to reach the conclusion that because the planning authority seeks to impose on a planning permission which is otherwise entirely good an invalid time limit that the whole permission should fail. The applicant, who may have acted on the permission, suddenly finds through no fault of his own that, after all, he has and never had had any valid permission at all. Let me say that in putting it in that way I am not introducing any concept of estoppel nor any doctrine of contra proferentes—see the observations of Singleton LJ in Crisp from the Fens Ltd v Rutland County Council. I am only pointing out the injustice which is inflicted on one of Her Majesty’s subjects if the matter is merely seen through the spectacles of the local planning authority.

In my opinion, condition (ii) can readily be severed without doing any violence to the language that remains and without affecting in any way the substance of the grant of permission itself so that the grants of permissions were valid, the respective conditions (ii) were invalid but the original grants of permission remain valid and effectual without those time conditions.

For these reasons I would dismiss these conjoined appeals.

Appeals allowed.

LORD DONOVAN. My Lords, I have had the advantage of reading the opinion prepared by my noble and learned friend, Lord Morris of Borth-y-Gest. I entirely agree with it and for the same reasons would allow the appeals.

Solicitors: Sharpe, Pritchard & Co (for the appellants); Barlow, Lyde & Gilbert agents for Girling, Wilson & Harvie, Margate (for the respondent company); Argles & Court (for the respondent, Allan Kenworthy).

S A Hatteea Esq   Barrister.

R v National Insurance Commissioner, ex parte Hudson and Jones

[1970] 1 All ER 97

Categories:        SOCIAL SECURITY        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        LORD DENNING MR, EDMUND DAVIES AND FENTON ATKINSON LJJ        

Hearing Date(s):        8, 9, 10 OCTOBER, 13 NOVEMBER 1969        

Industrial injury – Medical Appeal Tribunal – Jurisdiction – Scope of jurisdiction – Finding by statutory authorities (local insurance officer and local appeal tribunal) on claims for injury benefit that injured workmen suffered heart conditions caused by accidents – Subsequent application by workmen for disablement benefit – Whether Medical Appeal Tribunal bound to accept findings that heart conditions caused by accident – Burden of proof – National Insurance Act 1965, s 75 – National Insurance Act 1966, s 8(1)(a).

H and J suffered injury by accident in the course of their employment and the statutory authoritiesa awarded each injury benefit, in the case of H on the basis that he had suffered hernia resulting in a heart condition, myocardial infarction (although there was no positive finding by the statutory authority) and in the case of J injury benefit was awarded on the express findings that he had suffered a strained back resulting in myocardial infarction. He and J applied for disablement benefit and in each case the Medical Appeal Tribunal found that the myocardial infarction was not the result of the accident and assessed disability at 3 per cent, finding that (in the case of H) only the hernia and (in the case of J) only the strained back resulted from the accident.

Held – (i) (Edmund Davies LJ dissenting) To award injury benefit the statutory authorities did not have to find the precise nature or extent of the injury but only that some incapacitating injury had been suffered and therefore their opinion or findings as to the particular injury were not finalb so as to bind the medical authorities in assessing disablement benefit, and only the finding that there was some injury, in consequence of which injury benefit was payable, was final under the National Insurance Act 1965, s 75, as applied by the National Insurance Act 1966, s 8(1)(a)c; accordingly, it was open to the Medical Appeal Tribunal to find that the myocardial infarction was not the result of the accident (see p 101 e and f, p 101 j, to p 102 a, and p 108 e, post);

Minister of Social Security v Amalgamated Engineering Union [1967] 1 All ER 210) distinguished.

(ii) The burden of proving before the medical authorities that the local of faculty was the result of the accident was on H and J and once they had discharged that burden they would be presumed to suffer all the disabilities which a normal man would suffer from such a loss of faculty unless the contrary was shown; accordingly H and J having proved only a hernia and strained back respectively, were ssessed correctly (see p 102 e, and p 107 a; cf p 108 f and g, post).

Decisions of the Queen’s Bench Division [1969] 2 All ER 631 and 638 affirmed.

Notes

For disablement benefit, see 27 Halsbury’s Laws (3rd Edn) 824, 825, paras 1451, 1452, and for the determination of industrial injuries claims and questions, see ibid pp 853–866, paras 1495–1513.

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For the National Insurance Act 1965, s 75, see 45 Halsbury’s Statutes (2nd Edn) 1021, for the National Insurance Act 1966, s 8, see 46 ibid, p 479.

Case referred to in judgments

Minister of Social Security v Amalgamated Engineering Union (Re Dowling) [1967] 1 All ER 210, [1967] 1 AC 725, [1967] 2 WLR 516; affg [1966] 1 All ER 705, [1967] 1 QB 202, [1966] 2 WLR 1301., Digest (Repl) Supp.

Appeals

These were appeals by Donald Kenneth Raymond Hudson and David Lloyd Jones against decisions of the Divisional Court (Lord Parker CJ, Ashworth and Willis JJ) dated 11 and 13 December 1968 and reported [1969] 2 All ER 631 and 638, refusing to grant the appellants orders of certiorari to bring up and quash decisions of National Insurance Commissioners dated respectively, 12 July 1967 and 27 December 1967, whereby the commissioners refused to grant the appellants leave to appeal from decisions of the Medical Appeal Tribunal dated 27 September 1966 and 14 April 1965 assessing the appellants’ entitlement to disablement benefit under the National Insurance (Industrial Injuries) Act 1965. The facts are set out in the judgment of Lord Denning MR.

Peter Pain QC and S J Waldman for the appellants.

Gordon Slynn for the Minister of Social Security.

Cur adv vult

13 November 1969. The following judgments were delivered.

LORD DENNING MR. Introductory. In this case it is important to bear in mind throughout the difference between injury benefit and disablement benefit. Injury benefit is payable when a man has been injured at work. It lasts only during the time that he is incapacitated for work; and is for at most six months. It is determined by the statutory authorities (ie the local insurance officer, or the local appeal tribunal, or the commissioners) who are not medical men, although they can get a medical report if they wish. Disablement benefit is payable for any disabilities that the man sustains from the injury, even though he is still able to work. It lasts so long as the disability remains, often for life. It is determined by the medical authorities (ie the medical board, or Medical Appeal Tribunal) who are qualified medical men. It starts only after injury benefit stops. The two do not run together.

The jurisdiction of the two sets of authorities was much considered in Minister of Social Security v Amalgamated Engineering Union (Re Dowling). Mr Dowling, whilst moving a heavy granite flagstone, felt an acute pain in his chest. His complaint was eventually diagnosed as a small hiatus hernia. He claimed injury benefit. This claim went before the statutory authorities. The commissioner (H I Nelson Esq QC) found that the hernia was the result of overexertion at work and, accordingly, that Mr Dowling suffered ‘personal injury by accident’ arising out of and in the course of his insurable employment. The commissioner accordingly awarded Mr Dowling injury benefit. By the express words of the statuted, his decision on ‘any question arising in connection with’ the claim for injury benefit was final.

Mr Dowling afterwards claimed disablement benefit. The claim went before the medical authorities. The Medical Appeal Tribunal found that the hernia was not the result of the overexertion, so that he did not suffer any injury as a result of the accident. Accordingly, they rejected his claim to disablement benefit. Mr Dowling

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applied for an order of certiorari to quash the order of the medical authorities. The House of Lords quashed it. Lord Morris of Borth-y-Gest said ([1967] 1 All ER 217, [1967] 1 AC at 746):

‘They [the medical authorities] start with the premise that there has been injury caused by accident. They cannot say there has been no injury.’

2. The present case. We have now before us two cases which are a sequel to the Dowling case. In each of them the man overexerted himself at work and did himself an injury. In the one case a hernia. In the other case a strained back. That is accepted. But in each case he was also found to be suffering from myocardial infarction (coronary thrombosis). The statutory authorities thought that it was due to the accident. The medical authorities thought that it was not. Which is to prevail? That is the question.

Mr Hudson’s case. On 19 January 1965 the appellant, Mr Hudson, was lifting a piece of electric equipment when he strained himself. He went to the first-aid room. Hernia was suspected and he was advised to see his own doctor. His doctor gave him a certificate that he was incapable of work by reason of: ‘Chest pain. Not yet diagnosed.' On 15 February 1965, his doctor certified him as incapable of work by reason of ‘myocardial infarction’ (which is a kind of coronary thrombosis). On 17 April 1965 the doctor certified that he had been incapable of work up to that date by reason of coronary thrombosis, but that he would be fit the next day, 18 April 1965. So Mr Hudson went back to work. Throughout his illness, Mr Hudson was receiving sickness benefit under the national insurance scheme (which is, of course, payable irrespective of the case).

On 20 September 1965 Mr Hudson applied to the local insurance officer for a declaration that his accident was an industrial accident. In the application he said that his injury was ‘hernia’. The insurance officer made enquiries of his employers, and, on receiving their confirmation that he had strained himself and suspected hernia, the insurance officer made a declaration that the accident was an industrial accident. The declaration did not specify the nature of the injury, but no doubt it was believed to be hernia.

On 3 November 1965, Mr Hudson claimed disablement benefit. He was examined by a medical board. On 20 December 1965, they held that the hernia was the result of the accident and awarded him 3 per cent disablement benefit for life. They found also that he had myocardial infarction, which might be due to the accident, but felt that they could not take it into account as he had not claimed for it. They made this remark:

‘The board discussed this case as his heart attack occurred the day of the rupture when he had been subjected to considerable strain which might also be the cause of the heart lesion but this is made unconnected as no claim has been made.’

Mr Hudson went to solicitors who obtained a report from Dr Walter Somerville of Harley Street, who wrote:

‘In my opinion there is a direct causal relationship between the development of the coronary thrombosis and the physical effort earlier that day.’

The case was put before the Minister. Soon afterwards the insurance officer arranged to pay Mr Hudson injury benefit. The officer sent Mr Hudson a notification. Presumably the official form, which gave no particulars. It simply stated—‘Your claim for industrial injury benefit in respect of an industrial accident on 19 January 1965, has been allowed.' It appears that the letter did not specify the nature of the injury for which it was paid. Injury benefit was in fact paid not the period from 19 January 1965 to 17 April 1965, when he was off work.

On those facts I find no decision by the statutory authorities as to what the injury

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was. I expect that they thought that it was both the hernia and the myocardial infarction. But there was no finding to that effect. Only a grant of injury benefit.

Later on Mr Hudson wished to pursue the claim for disablement benefit. It came before the Medical Appeal Tribunal. They awarded 3 per cent disablement for the hernia, but they disallowed his claim for heart condition. They said:

‘Exertion being of itself no precipitating factor in my ocardial infarction, we can find nothing in this case to associate that condition with the relevant accident.’

Mr Hudson applied to the commissioner (H I Nelson Esq QC) for leave to appeal. On 12 July 1967, he dismissed his application. Mr Hudson now applies for an order to quash the decision of the commissioner on the ground that, in making an award of injury benefit, the statutory authorities had decided that the myocardial infarction was the result of the strain; and that decision was final, so that the Medical Appeal Tribunal could not contradict it. The Divisional Court ([1969] 2 All ER 631, [1969] 2 WLR 639) refused his application He now appeals to this Court.

My Jones’s case. On 27 February 1964, the appellant, Mr Jones, was loading cast-iron scraps on to a wagon when he strained his back. He stopped work at once. He claimed injury benefit for ‘strain of right shoulder’. A week later he was taken to hospital suffering with pains in his chest and loss of breath. On 17 March 1964, he was found to be suffering from ‘myocardial infarction’. The insurance officer rejected his claim for injury benefit. Mr Jones appealed to the local tribunal, who called in a medical assessor Dr E H Morris of Portmadoc, who stated:

‘… I consider that his work at time of accident was exceptionally heavy; I think it probable that it in fact caused the infarction.’

On that evidence the local tribunal, on 6 November 1964, allowed the appeal and awarded injury benefit. They stated their findings to be:

‘Satisfied that appellant had no previous history of cardiac infarction and that the symptoms noted shortly after the accident were in fact those of infarction though not then recognised as such, also that the work he was engaged on at the time was exceptionally heavy for him as a fitter.’

He was issued a certificate on which the cause of incapacity was stated to be: ‘Strain of back (inj) and myocarditis.' I infer from that certificate that it was the strain of back which was accepted as the injury. He was paid injury benefit from 27 February 1964 to 26 August 1964.

In December 1964 Mr Jones applied for disablement benefit. This went before the medical authorities. The medical board assessed his disability from the strained chest at 3 per cent and said that the myocardial infarction was unconnected with the accident. On 14 April 1965, the Medical Appeal Tribunal confirmed the decision of the medical board, stating:

‘The Tribunal are not satisfied that upon the balance of probabilities the relevant accident played any part, either by cause or contribution, in the infarction.’

Mr Jones appealed to the commissioner (G O George Esq) who, on 27 December 1967, dismissed his appeal.

Mr Jones now applies for an order to quash the decision of the commissioner on the ground that the statutory authorities, in awarding injury benefit, had decided that myocardial infarction was the result of the strain; and that their decision was final. The Division Court ([1962] 2 All ER 638, [1969] 2 WLR 647) dismissed his application. He now appeals to this court.

3. The statutory provisions. Dowling’s case was decided under the National Insurance

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(Industrial Injuries) Act 1946. That Act has been replaced by a complex set of provisions in the National Insurance (Industrial Injuries) Act 1965, the National Insurance Act 1965, and the National Insurance Act 1966. I do not propose to set out the whole lot of sections. They are only machinery so as to enable one set of officials to deal with all matters under both the National Insurance Acts and the Industrial Injuries Acts. But otherwise the provisions as to finality remain the same as before. In place of s 36(2) and (3) of the 1946 Act, we have s 8(1)(a) of the National Insurance Act 1966, which applies s 75 of the National Insurance Act 1965 to certain questions under the National Insurance (Industrial Injuries) Act 1965. It provides (making all necessary qualifications):

‘For the purposes of the determination of claims and questions under the Industrial Injuries Act—(a) any claim for benefit under that Act and any question arising in connection with a claim for or award of such benefit [other than Minister’s questions and disablement questions] shall … be determined … ’

(by an insurance officer, a local appeals tribunal, or the Commissioner) and the decision of any claim or question (by those bodies) shall be final. So it is enacted that, when the statutory authorities determine a claim for benefit under the National Insurance (Industrial Injuries) Act 1965, the decision by them of ‘any question arising in connection with a claim for or award of such benefit’ is final.

In order to award injury benefit, the statutory authorities have to finde that the man has suffered ‘personal injury—by accident arising out of and in the course of his employment’, and, in consequence, is ‘incapable of work’. I do not think that the statutory authorities have to find the precise nature or extent of the injury or injuries. They are not qualified to do so. They are not medical men. They have to take decisions quickly before any accurate diagnosis can be made. They cannot be expected to do more than to say: ‘We are satisfied that this man was injured at work’ and award injury benefit accordingly. After all, injury benefit only lasts while the man is unfit for work, and at most for six months. Suffice it, therefore, for the statutory authorities to find that he suffered some injury or other that incapacitates him. Their finding that he has suffered some injury is final. But not their finding as to any particular kind of injury. The medical authorities, when they come to assess the loss of faculty and resulting disablement, have to be more precise. Their decision may mean an award for life. They must make an accurate diagnosis. They are qualified to do it. They cannot make a finding that the man suffered no injury at all from the accident. (That is established by the Dowling case.) But they can find that he suffered a greater injury or injuries, or a lesser injury or injuries, or a different injury or injuries, from that found by the statutory authorities. Counsel for the appellants admits that they could find a greater injury or injuries but he says that they could not find a lesser injury or injuries. I see no warrant to this distinction. If they can find a greater, they must be able to find a lesser.

Applying these principles, in both these cases the statutory authorities, no doubt, thought that the man suffered two injuries. In Mr Hudson’s case hernia and myocardial infarction (although there was no positive finding by the statutory authorities). In Mr Jones’s case strained back and myocardial infarction (in which case they stated it as a finding). But I do not think their opinion, or even findings, as to the particular injuries were final. All that was final was that there had been some injury, in consequence of which injury benefit was payable. It was, I think, open to the medical authorities to form their own view of the injury so long as they did not deny any injury at all. This is what they did. In the one case hernia, in the other a strained back, as a result of the accident and awarding disablement benefit of 3 per cent.

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But it was open to them to find, as they did, that the myocardial infarction was not the result of the accident at all.

4. Burden of proof. It is said that in any case the medical authorities put the burden of proof the wrong way; in that they put on the appellant the burden of proving that the myocardial infarction was the result of the accident; whereas under Sch 4 of the National Insurance (Industrial Injuries) Act 1965 it is on the insurance authorities.

The Act is most confusing on the burden of proof. I think it is to be explained by realising that ‘the loss of faculty’ is one thing; the ‘resulting disablement’ is another. ‘The loss of faculty’ is the defect in the man’s physical or mental condition, eg the loss of his first finger. The ‘resulting disablement’ is the effect it has in preventing him doing things, eg in writing or picking things up. The Act is so worded as to put on the man the burden of proving the loss of faculty, eg that he lost the first finger, as a result of the accident, see s 12(1). I do not suggest that this is a heavy burden. It is sufficient if the probabilities point that way. But once he so proves it, then under Sch 4 he is presumed to suffer all the disabilities which a normal man would suffer from that loss of faculty (eg from the loss of a first finger), unless the contrary is shown, as it might be for instance if he afterwards lost the arm itself in a motor accident. So here the burden was on each of the appellants to prove that the loss of faculty (eg the hernia) was the result of the accident. Once he proved that the hernia was the result, it is presumed that he would suffer all the disabilities from hernia that a normal man would. Likewise with a strained back; or a myocardial infarction. Each of those involves a loss of faculty. He must prove it was the result of the accident. Once he proves it, then he is presumed to suffer all the disabilities which a normal man would suffer from such a loss of faculty, unless the contrary is shown.

In the present cases, Mr Hudson proved his hernia. Mr Jones proved his strained back. Each suffers the normal disabilities from it. Each has been assessed at 3 per cent for life. But neither proved that the myocardial infarction was the result of the accident. So neither is entitled to disablement benefit for it. I do not think that the medical authorities put the burden wrongly.

5. Conclusion. I see no error of law on the face of the record in these cases. I would not grant an order of certiorari.

EDMUND DAVIES LJ. These appeals involve consideration of two points. The first, which I have found more difficult of determination than the second, turns essentially on the ambit of s 75 of the National Insurance Act 1965. This provides that, subject to certain regulations therein referred to, ‘the decision of any claim or question in accordance with the provisions of those regulations shall be final’. When rejecting the application of Mr Hudson, Lord Parker CJ said in the Divisional Court ([1969] 2 All ER at 635, [1969] 2 WLR at 645): ‘The only difficulty about this is to be found in the words of s 75 … words which are very wide … ’ How wide a consideration should be placed on them is the crucial point in both appeals.

In view of the statutory provision as to finality, each appellant submits that the only investigation called for is: what ‘claim or question’ (the singular including the plural) was decided by the statutory authority in awarding injury benefit before the medical authority ever had to consider the claim to disablement benefit? The decision of ‘any claim or question’ by the former authority, so it is submitted, is binding on the latter, otherwise one strips it of that finality with which s 75 clothed it. Accordingly, once the statutory authority decided that a certain physiological condition resulted from an industrial accident, it can never thereafter be open to the medical authority to deny the accuracy of that ‘decision’. So, in outline, runs the argument for both appellants. If it be right, it follows that each must now succeed.

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The contrasting view was, if I may say so, clearly expressed by Lord Parker CJ in Hudson’s case ([1969] 2 All ER at 635, [1969] 2 WLR at 645), in this way:

‘… as it seems to me, one has to look and see what the decision in any case is, and it seems to me that when one is dealing with injury benefit or a declaration, the real decision is that there has been an industrial accident, and there has been some injury (and in the former case an incapacitating injury). Those two matters are binding on the medical authorities, but nothing more.’

So holding, Lord Parker CJ said in the Hudson case ([1969] 2 All ER at 635, [1969] 2 WLR at 645) that:

‘… the medical authorities … provided they say nothing which conflicts with there having been an accident and some injury, are entitled to substitute another injury for one found by the local insurance officer..’

In the Jones case ([1969] 2 All ER at 638, [1969] 2 WLR at 650) Lord Parker CJ said:

‘I am satisfied … that here the medical authorities were fully entitled to find that while one of the injuries, the heart condition, had never existed, yet the condition of strained chest had been there originally, remained there and that a disablement benefit should be given in respect of that. In coming to that decision they were not disputing or overruling the decision that there had been an industrial accident.’

One may, however, parenthetically note that in Mr Jones’s case there was no suggestion that ‘the heart condition had never existed’; indeed, its existence was conceded, and the dispute was solely as to its attributability to the accident.

I have not found it a simple task to determine which of the two views referred to is the correct one. Section 5(1) of the National Insurance (Industrial Injuries) Act 1965 provides:

‘… where an insured person suffers personal injury … by accident arising out of and in the course of his … insurable employment, then—(a) … “injury benefit” shall be payable … provided he is, as the result of the injury, incapable of work;’

and s 11(1) has a similar provision. Accordingly, whenever a statutory authority has to adjudicate on a claim for injury benefit, the questions that he has to decide appear to be these (and there may well be others): (1) was the insured claimant involved in an accident? (2) if so, did it arise out of and in the course of his insurable employment? (3) if so, did he suffer personal injury as a result of that accident? (4) if he did, was he thereby rendered incapable of work? In Mr Jones’s case the learned commissioner said:

‘There is nowhere any provision requiring the statutory authorities to specify or define the nature of the relevant injury. If they purport to do so, that part of their finding is not essential to their decision.’

I am afraid I am unable to follow this. It defeats me how questions (3) and (4) can be answered without the statutory authority considering and coming to a conclusion regarding the nature of the personal injury found to result from the accident. Indeed, the whole system of appeals in injury benefit claims—from local officer to local appeal tribunal and thence to the commissioner—would be unworkable unless there was a claim that a specified injury has been sustained, a ‘decision’ that it has or had not, and (in the former case) a ‘decision’ as to the nature of the injury which the claimant proved he had sustained.

The question is whether such decision or decisions is or are binding on the medical

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authority when they come to consider a claim for disablement benefit. The decision of the House of Lords in Minister of Social Security v Amalgamated Engineering Union (Re Dowling) is said not to be directly in point, but it may be noted in passing that when that case was in the Court of Appeal, Lord Denning MR said ([1966] 1 All ER 705 at 709, [1967] 1 QB 202 at 218):

‘Given that there was personal injury caused by accident (which has already been found finally and conclusively by the statutory authorities) the medical authorities should ask themselves—did this injury result in a loss of faculty such as to disable him? If so, what was the extent of the disablement?’

It is, however, urged for the Minister that the facts of that case were markedly different from those of the two cases now under consideration in that there only one physical injury (hiatus hernia) was found by the statutory authority to result from the accident and that alone was sought to be made the basis of the disablement benefit claim, whereas here there are said to have been two relevant injuries found by the statutory authority. But in this context, it appears of some importance to note that in each of the present cases it was the decision of the statutory authority that myocardial infarction resulted from the relevant accident which was certainly the substantial (if, indeed, it was not the entire) basis of the award of injury benefit. On the material before the court, I find it obscure to what extent (if at all) the ‘hernia’ in Mr Hudson’s case, and the ‘strained chest’ in Mr Jones’s case induced that award. If they played any part, it was clearly of virtually complete insignificance in comparison with the infarction.

Although it is said that the aforementioned distinction must be drawn between the facts of the Dowling case and the present appeals, I find much in the opinion of Lord Morris of Borth-y-Gest which appears not to turn essentially on such a distinction. Be that as it may, the answer to the first question raised by the appeal depends, as it seems to me, on what it is that a claimant for disablement benefit is required to establish to the satisfaction of the medical authority. Section 5(1) of the National Insurance (Industrial Injuries) Act 1965 provides that where personal injury is caused by an industrial accident, then:

‘… (b) industrial disablement benefit … shall be payable to the insured person if he suffers, as the result of the injury, from … loss of physical or mental faculty … ’

Section 12(1) provides:

‘… an insured person shall be entitled to disablement benefit if he suffers as the result of the relevant accident from loss of physical or mental faculty … ’

Finally, s 37 provides:

‘… any of the following questions arising under this Act (hereinafter in this Act referred to as the “disablement questions”), that is to say—(a) whether the relevant accident has resulted in a loss of faculty; (b) at what degree the extent of disablement resulting from a loss of faculty is to be assessed, and what period … shall be referred to and determined by a medical board or medical appeal tribunal..’

It is to be observed that the Act does not call on the medical authorities to determine whether the ‘relevant accident’ has resulted in personal injury. On the contrary, it proceeds on the basis that such a result ensued, but it charges them with the duty of deciding primarily whether the injury sustained led to a loss of faculty. Why should this be so? Is it not because, the statutory authority having already determined what injury (or injuries) resulted from the accident, there has thereby been a ‘decision’ on a ‘question’ which must be regarded by the medical authorities also as ‘final’, by virtue of s 75?

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For the Minister it is urged that an affirmative answer to that question would unreasonably fetter the medical authorities, and that, short of wholly denying that the workman ever sustained any injury (thereby flouting the Dowling case), it is open to them to hold as unconnected with the accident the injury which is claimed to entitle the workman to disablement benefit, regardless of the part it played in securing for the workman an award of industrial injury benefit. In Hudson’s case ([1969] 2 All ER at 636, 637, [1969] 2 WLR at 646), Ashworth J put the matter in this way:

‘… there are two, so to speak, channels of administration; one is truly administrative … The other channel is the medical one, and it would seem to me to accord with common sense that medical issues so called are dealt with by the medical channels, and conversely factual matters, such as the question whether there has ever been an accident, and whether it arose out of the employment, are dealt with by the statutory board.’

It may be that this neat dichotomy is desirable, but, with respect, I fail to find it in the statutory provisions. While ‘disablement questions’ are undoubtedly the sole preserve of the medical authorities, many medical issues are daily resolved by the statutory authorities when dealing with injury benefit and other claims. For example, ss 11, 13, 14, 15 and 19 of the National Insurance (Industrial Injuries) Act 1965 all place on the statutory authority the duty of deciding questions which are essentially medical and which may be far from easy of determination. They are dealt with in the first place by the insurance officer, who has to decide, not merely whether there has been an industrial accident causing injury, but also whether the claimant has been rendered incapable of working as a result of the relevant injury. In performing his task he is entitled, although not bound, to obtain a medical report—he obtained two in Mr Hudson’s case—since a medical issue is clearly and inevitably involved. An appeal then lies to the local appeal tribunal, which may have the assistance of a medical assessor without power of decision—as occurred in Mr Jones’s case—since that tribunal is equally concerned with a medical issue. To say that they and the commissioner dealing with an injury benefit claim are not concerned with the nature of the relevant injury (or injuries) is something which I am unable to follow and, with great respect, I do not think it is right. Thus, in the Dowling case the deputy insurance commissioner, to whom the claim for industrial injury benefit had been referred under s 30(2) of the National Insurance (Industrial Injuries) Act 1946 heard conflicting medical evidence, and thereafter came to the conclusion that the claimant had indeed suffered hiatus hernia by accident arising out of and in the course of his employment. As Lord Hodson said ([1967] 1 All ER at 219, [1967] 1 AC at 750):

‘In order to ascertain whether there was an accident, he had to resolve the conflict of medical testimony and, in doing so, he was acting within his jurisdiction.’

In his dissenting opinion in the Dowling case ([1967] 1 All ER t 223, [1967] 1 AC at 756), Lord Wilberforce expressed the view that—

‘Insofar as the commissioner’s decision was on a claim, the claim was for injury benefit—it is not final on any other claim … a decision as to a matter within the jurisdiction of a particular authority is final; it [ie s 36(3) of the 1946 Act] throws no light on the division of jurisdiction between competing authorities.’

But, regardless of the nature of the relief sought (be it injury benefit, disablement benefit, or a declaration) one of the questions which must be decided is whether the physical impairment (‘personal injury’) complained of resulted from the relevant

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accident, and this again regardless of the further question of whether it had an incapacitating or a disabling consequence. That ‘question’ having been decided in the employee’s favour in his injury claim, I have to say with respect that I find nothing in s 75 of the National Insurance Act 1965 or in the general pattern of the statutory scheme which restricts the finality of that finding to the matter of injury benefit only.

In particular, with diffidence, I am unable to read s 8(1)(a) of the National Insurance Act 1966 as Lord Denning MR has done and thereby restrict the ambit of finality of any ‘decision’ to ‘such benefit’ as was under consideration when that decision was arrived at. Indeed, before us counsel for the Minister expressly stated that he could make no such submission in the light of the observation of Lord Hodson in the Dowling case ([1967] 1 All ER at 219, [1967] 1 AC at 750) that:

‘There is no reason to limit the meaning of the word “final”, as the Minister seeks to do, to the particular claim which is being dealt with. The claims for injury and disablement benefit are linked together and in the normal case they follow one another.’

It may be that legislation is called for to restrict to certain specified issues only the finality of the decision regarding any ‘claim or question’, but this court can only deal with the statutory provisions as they now exist. Accordingly, although oppressed by the realisation that mine is a solitary voice among several far more sonorous, and while sharing the view expressed by Lord Parker CJ in Hudson’s case ([1969] 2 All ER at 632, [1969] 2 WLR at 641) that the first question posed is a difficult one, I would for my part answer it in a manner favourable to the appellants.

I turn to consider very shortly the second question, which relates to the onus of proof on claims for disablement. Following on s 37 of the National Insurance (Industrial Injuries) Act 1965, Sch 4 thereof provides for the ‘Assessment of extent of disablement’. Two factors are involved: (1) loss of faculty; and (2) disablement resulting therefrom. Now, injury benefit and disablement benefit do not overlap, the latter not being payable while the former is being drawn. But if the incapacitating physical condition entitling a workman to injury benefit persists after the maximum period for which it can be drawn (ie 156 days), it is difficult to see how he can be denied disablement benefit, since he must, on that hypothesis, surely be both suffering from a loss of faculty and disabled thereby. It being obvious, however, that the fact that he has sometime (even in the recent past) drawn injury benefit does not signify that a loss of faculty necessarily still persists at the time when his claim to disablement benefit falls to be considered, it is for the claimant to establish: (a) that such a loss of faculty then exists; and (b) that it results from the relevant ‘injury’ (according to s 5(1)) or from the ‘relevant accident’ (according to ss 12 and 37). (a) will depend on the medical and other evidence he calls, while as to (b) he has in his favour the ‘final’ decision of the statutory authority that the personal injury said to have led to the faculty loss did in fact result from the relevant accident. Once the claimant has succeeded in establishing (a) and (b), Sch 4 passes the burden of proof to the Minister, by providing that all disabilities ascertained in accordance with para (1)(a) thereof must be assumed to be the result of the relevant loss of faculty unless and until he proves the contrary by the means specified in para 1 (b).

How did the medical authorities approach their task in the appellants’ cases? The appellant being armed with the decision of the statutory authority in each case that infarction resulted from the relevant accident and it being unchallenged that that same infarction still persisted, the duties of the medical authority were confined to those summarised in s 37(b), Sch 4 governing the manner in which they were required to perform those duties. But in neither case did they so confine themselves for in each they first enquired whether the heart condition was attributable to the

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accident. The appellants complain that the Medical Appeal Tribunal in each case wrongly imposed on them the duty of proving the degree and extent of disablement without having regard to the assumptions required to be made in their favour in accordance with Sch 4. I do not think that this criticism is well founded. On the contrary, I agree with the views expressed by Lord Parker CJ in Hudson’s case ([1969] 2 All ER at 636, [1969] 2 WLR at 646) that—‘… what [the Medical Appeal Tribunal] are considering … is merely loss of faculty and have not gone on to consider disablement.’

As it seems to me, the error of the tribunal was of a different kind from that complained of by the appellants. That error related not simply to the matter of strict onus but to the extent to which the hands of the medical authorities were already tied in each case by the findings of the statutory authorities that the infarction (which admittedly persisted and gave rise to a loss of faculty) was a result of the relevant accident. I have already expressed my view on this point and desire to add nothing further. That view leads me to the conclusion that these appeals should both be allowed and each appellant granted the relief he seeks.

FENTON ATKINSON LJ. 1. I agree with Lord Denning MR. The right to injury benefit is determined, subject to appeal to the commissioner, by the statutory authorities (ie insurance officer, and local appeal tribunal). Such a right is established when a claimant can show that, being in insurable employment, he has suffered injury by accident arising out of and in the course of his employment which has resulted in incapacity for work. There is no statutory duty on the authority which allows a claim for injury benefit to ascertain or define with precision the nature or full extent of the injury, and in many cases a decision will be made allowing a claim on the scantiest medical information.

2. At a later stage, after 26 weeks or earlier if incapacity for work as the result of the accident ends earlier, it is the medical authorities (medical board and Medical Appeal Tribunal) who are charged with the statutory duty under ss 12(1) and 37 of the National Insurance (Industrial Injuries) Act 1965 of deciding whether the relevant accident has resulted in a loss of faculty and at what degree and over what period the extent of disablement resulting from that loss of faculty is to be assessed.

3. It follows that when the matter passes to the medical authorities: (a) the claimant has to prove loss of faculty resulting from the relevant accident; and (b) the board or appeal tribunal then have to assess the extent of disablement and for this purpose must follow para 1 of Sch 4 of the 1965 Act.

4. The question for decision in these appeals, as it seems to me, is how far the medical authorities in performing the duty imposed on them by statute of giving an answer to certain purely medical questions can be prevented from giving the answer they know or believe by virtue of their expert knowledge to be correct, by reason of some prior decision or opinion of an insurance officer or other non-medical statutory authority.

5. Minister of Social Security v Amalgamated Engineering Union (Re Dowling) has decided that in the exceptional case where injury in the course of work is in fact the accident, the medical authorities cannot, as it were, destroy the very basis of their jurisdiction by saying, in effect, contrary to the previous decision of the statutory authorities, that there has been no industrial accident. In the Dowling case, however, there was only one injury, namely, hiatus hernia. The grant of injury benefit by the statutory authorities necessarily involved the decision that Mr Dowling had suffered that particular form of physiological injury as the result of the work he was engaged on. For my part, I can see no justification for the view that any decision or expression of opinion of the statutory authorities as to any medical issue which is not essential

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to found the right to injury benefit is binding on the medical men who are later charged by statute with deciding questions of disablement benefit.

6. I agree entirely with the passage in the judgment of Lord Parker CJ in the Divisional Court in Hudson’s case ([1969] 2 All ER at 635, [1969] 2 WLR at 645) where he said:

‘In my judgment the medical authorities are, as it were, estopped from coming to any finding which results in there being no accident or which results in there being no injury, but provided they say nothing which conflicts with there having been an accident and some injury, they are entitled to substitute another injury for one found by the local insurance officer, and of course what is quite clear, any further injuries that may have been discovered meanwhile.’

7. Counsel for the appellants says that is wrong and the decision of any question by the statutory authorities in any way connected with the right to injury benefit, for example, the expression of an opinion as to the precise nature of the medical condition of the claimant giving rise to the incapacity, is also final and binding on the medical authorities even when they can ascertain beyond a peradventure that the earlier opinion was wrong. For example, the local insurance officer grants injury benefit and says the injury is ‘strained back’. The medical authorities discover there never was a strained back but in fact the injury was very serious spinal damage—counsel for the appellants’ argument logically must be that they cannot say so. When an illustration of this kind was put to him, he said that the medical authorities could substitute a more serious injury but not a lesser one. I cannot accept his.

8. In my view, which was also the view of both the experienced commissioners who considered these cases and of the Divisional Court ([1969] 2 All ER 631 and 638, [1969] 2 WLR 639 and 647), the medical authorities are not to be called on to perform the statutory duties laid on them fettered by any decision or expression of opinion of an insurance officer or local appeal tribunal as to the nature or extent of the injury for which they have granted injury benefit, unless such decision or expression of opinion was essential to found a right to such benefit.

9. On the second point raised on onus of proof, I agree with the Divisional Court. In both cases the Medical Appeal Tribunal had to decide whether the claimant had proved that the heart condition was a loss of faculty resulting from the relevant accident. In Mr Hudson’s case they said there was nothing to associate that condition with the relevant accident. In Mr Jones’s case they said they were not satisfied on the balance of probabilities that the relevant accident in any way caused or contributed to the heart condition. In my view, in both cases the words complained of related solely to the loss of faculty from the relevant accident, which it was for the claimant to establish. They then went on to consider the extent of disablement from the loss of faculty they found established, in one case ‘hernia’, in the other case ‘strained chest’, and there is nothing on the face of the record to suggest that in fixing the figure of 3 per cent they misdirected themselves in any way.

I would dismiss the appeals.

Appeals dismissed. Leave to appeal to the House of Lords granted.

Solicitors: W H Thompson (for the appellants); Solicitor, Ministry of Social Security.

Wendy Shockett   Barrister.

W Houston & Sons Ltd v Armstrong

[1970] 1 All ER 109

Categories:        CRIMINAL; Criminal Law        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD PARKER CJ, ASHWORTH AND CANTLEY JJ        

Hearing Date(s):        20 OCTOBER 1969        

Trade – Scrap metal dealer – Record of dealings – Book to be retained for two years – Book need not be retained at store – Scrap Metal Dealers Act 1964, s 2(5).

The book required by s 2a of the Scrap Metal Dealers Act 1964 to be kept by every scrap metal dealer at each place occupied by him as a scrap metal store and required by s 2(5)b to be retained by the scrap metal dealer until the end of the period of two years beginning with the day on which the last entry was made in the book, need not during that two-year period necessarily be kept at the store (see p 110 g, post).

Notes

For the obligation of scrap metal dealers to keep books, see Supplement to 38 Halsbury’s Laws (3rd Edn) paras 331–334, 4.

For the Scrap Metal Dealers Act 1964, s 2, see 44 Halsbury’s Statutes (2nd Edn) 1288.

Case stated

This was a case stated by the justices for the county of Chester acting in for the petty sessional division of South East Cheshire in respect of their adjudication as a magistrates’ court sitting at Congleton on 2 January 1969.

On 4 December 1968 information was preferred by the respondent, Vincent Armstrong, against the appellants, W Houston & Sons Ltd, charging that they on 10 October 1968 being required to keep a book in pursuance of s 2 of the Scrap Metal Dealers Act 1964 at a place occupied as a scrap metal store namely at no 2 Union Street, Congleton, failed to retain the book at the premises for a period of two years beginning with the day on which the last entry was made in the book contrary to s 2(5) of the Act.

The following facts were found: the appellants, a limited company, whose registered office was at no 85 Oakeley Street, Crewe, were scrap metal dealers registered under the Act and that no 2 Union Street, Congleton, was a place occupied by them as a scrap metal store on 10 October 1968 and that it had been so occupied since the Act came into force; on 10 October 1968, there was at no 2 Union Street, Congleton, a proper book complying with the provisions of the Act which book contained entries going back to 1 October 1968; that for previous months for at least a period of two years books similar to that produced for the month of October were retained by the appellants at their registered office or headquarters at Crewe.

It was contended by the respondent that on a true construction of s 2(1) of the Act read with s 2(5) the appellants were required to retain the books at no 2 Union Street, Congleton, and the information had been so worded to include the words ‘to retain the said book at the premises for a period of two years’.

It was contended by the appellants that on a true construction of s 2(5) of the Act, provided that a proper contemporaneous record was made under the provisions of s 2(1) and (4) of the Act, the duty of the appellants was to ensure that the records were retained; that the place of retention was immaterial and could equally be the appellants’ principal place of business in the case of an appellant who had more than one scrap metal store and the attention of the justices was drawn to the fact that s 2(5) of the Act did not contain the words ‘at the premises’.

The justices convicted the appellants and they now appeal.

Page 110 of [1970] 1 All ER 109

A R M Davies for the appellants.

The respondent did not appear and was not represented.

20 October 1969. The following judgment was delivered.

LORD PARKER CJ delivered the judgment of the court. This is an appeal by way of case stated from a decision of justices for the county of Chester sitting at Congleton, who convicted the appellants of an offence against s 2 of the Scrap Metal Dealers Act 1964, the offence alleged being that they at a place occupied as a scrap metal store, namely at no 2 Union Street, Congleton, failed to retain the book which they were required to keep for a period of two years beginning with the day on which the last entry was made in the book, contrary to the Scrap Metal Dealers Act 1964, s 2(5). Let me say at once that the information alleged that that book had to be retained ‘at the premises’, and those words ‘at the premises’ do not appear, as I will show in a moment, in the relevant subsection of the Act. The question is whether the book that they had to keep for the purposes of their business had, when it was full, to be retained at those premises.

What happened quite shortly was that the appellants duly complied with their duty to keep books at their various stores, including this store, no 2 Union Street, Congleton, but as and when the monthly book was completed they did not retain it at Congleton where there was little if any office accommodation but they took it for convenience to their headquarters at Crewe. The justices convicted and the question left for the decision of this court is whether they were correct in holding that the book had to be retained at the premises at Congleton. Section 2 of the Act provides:

‘(1) … every scrap metal dealer shall, at each place occupied by him as a scrap metal store, keep a book for the purposes of this section, and shall enter in the book the particulars required by this section with respect to … [In other words each store has to have its own book.]

‘(5) Any book kept by a person in pursuance of subsection (1) of this section shall be a bound book kept exclusively for the purposes of this section and shall be retained by him until the end of the period of two years beginning with the day on which the last entry was made in the book.’

The justices were clearly influenced by the opening words of that subsection which refer to ‘any book kept by a person in pursuance of subsection (1)’; that is kept at the place of the store, and they went on to read the words ‘retained by him’ as similarly qualified, ‘retained by him at the store’.

I have great sympathy with the justices, and it may well be that from the point of view of production and inspection, it is much easier for the local authority if all records, not merely the current one but past ones, are kept at the store in question. But for my part I find it very difficult to say that that is a necessary interpretation of this Act, which after all is a penal statute. It seems to me that it would have been so easy for the draftsman, if this was really considered a vital matter and intended, to have said ‘And shall be retained by him at each such place’. It does not say so, and as I have already said, from the point of view of the appellants, the easiest, simplest and natural thing was for them to take a completed book to their headquarters 12 miles away in Crewe. I would allow this appeal.

Appeal allowed.

Solicitors: Gibson & Weldon, agents for Arthur JS Hall & Co, Crewe (for the appellants).

N P Metcalfe Esq   Barrister.

Tumath v Tumath

[1970] 1 All ER 111

Categories:        FAMILY; Ancillary Finance and Property        

Court:        COURT OF APPEAL, DIVIL DIVISION        

Lord(s):        SALMON, EDMUND DAVIES LJJ AND SIR GORDON WILLMER        

Hearing Date(s):        17, 18 NOVEMBER, 2 DECEMBER 1969        

Divorce – Maintenance of wife – Assessment – Factors to be considered – Conduct of parties – Matters not raised at trial of suit – Public Policy – Res judicata – Undefended petition by wife on ground of adultery – Marriage irretrievably broken down – Evidence of wife’s desertion and denial of allegations in her discretion statement sought to be adduced by husband in maintenance proceedings.

In September 1968, the wife petitioned for divorce on the ground of the husband’s adultery with Mrs K on dates between March 1968 and the date of the petition, praying the court to exercise its discretion in respect of her own adultery. In her discretion statement the wife stated that the husband had confessed in 1966 to intercourse with a Mrs R, and that as a result of the husband’s encouragement the wife had had intercourse with Mr R on four occasions in 1966. Notice was served on the husband that the wife’s discretion statement alleged that he had conduced to her adultery with Mr R and had admitted his own adultery with Mrs R. The husband did not defend the petition as he had no defence to the allegations in it and, the marriage having irretrievably broken down, he did not wish the court to refuse to exercise its discretion in the wife’s favour. The wife was granted a decree on her petition. When subsequently she brought proceedings for maintenance the husband wished to adduce evidence that the wife had deserted him in June 1967, and to deny the allegations in the discretion statement that he had conduced to her adultery and had confessed to adultery with Mrs R. The county court judge ruled that the husband was precluded from giving evidence on any of these matters in the maintenance proceedings on the grounds of estoppel per rem judicatam and public policy. At the hearing of the husband’s appeal against that ruling the wife conceded, rightly as the court held, that the ruling could not be supported on the ground of res judicata and that public policy did not preclude the husband from denying the allegations in the discretion statement, but it was contended that public policy did require that the husband should be debarred from alleging that the wife had deserted him.

Held – Where a marriage had irretrievably broken down and would be dissolved there was no principle of public policy which inhibited the right of the parties to bring to light in maintenance proceedings all matters relevant to the conduct of the parties whether or not they had been raised at the trial of the suit and accordingly, the husband was not precluded by any rule of public policy from alleging in the maintenance proceedings desertion by the wife (see p 114 h, p 115 c, p 117 a to c, and p 120 d, post).

Restall v Restall [1930] All ER Rep 372 applied.

Dicta of Denning LJ in Trestain v Trestain [1950] P at 202, and of Sachs LJ in Porter v Porter [1969] 3 All ER at 644 approved.

Robinson v Robinson [1943] 1 All ER 251 overruled.

Observations on the application of the doctrine of res judicata at p 113 h, to p 114 a, p 115 j, to p 116 b, and p 118 j, post.

Notes

For the issue of the conduct fo the parties in maintenance proceedings, see 12 Halsbury’s Laws (3rd Edn) 434, 435, para 978, and for cases on the subject, see 27 Digest (Repl) 613–616, 5739–5762.

Cases referred to in judgments

Duchesne v Duchesne [1950] 2 All ER 784, [1951] P 101, 27 Digest (Repl) 615, 5760.

Page 112 of [1970] 1 All ER 111

Field v Field [1964] 2 All ER 81, [1964] P 336, [1964] 2 WLR 847, Digest (Cont Vol B) 378, 5957. Ac.

Herod v Herod [1938] 3 All ER 722, [1939] P 11, 108 LJP 27, 159 LT 530, 27 Digest (Repl) 360, 2978.

Hull v Hull [1960] 1 All ER 378, [1960] P 118, [1960] 2 WLR 627, Digest (Cont Vol A) 804, 6310a.

Lindsay v Lindsay [1934] P 162, [1934] All ER Rep 149, 103 LJP 100, 151 LT 283, 27 Digest (Repl) 614, 5746.

Mould v Mould [1933] P 76, [1933] All ER Rep 122, 102 LJP 21, 148 LT 499, 27 Digest (Repl) 613, 5745.

Ord v Ord [1923] 2 KB 432, [1923] All ER Rep 206, 92 LJKB 859, 129 LT 605, 28 Digest (Repl) 187, 768.

Porter v Porter [1969] 3 All ER 640, [1969] 1 WLR 1155.

Restall v Restall [1930] P 189, [1930] All ER Rep 372, 99 LJP 123, 143 LT 225, 27 Digest (Repl) 616, 5762.

Richards v Richards [1952] 1 All ER 1384, [1952] P 307, 116 JP 358, Digest (Cont Vol A) 728, 2979a.

Robinson v Robinson [1943] 1 All ER 251, [1943] P 43, 112 LJP 47, 168 LT 158, 27 Digest (Repl) 614, 5747.

Trestain v Trestain [1950] 1 All ER 618n, [1950] P 198, 27 Digest (Repl) 614, 5748.

Wood v Wood [1891] P 272, [1891–94] All ER Rep 506, 60 LJP 66, 64 LT 586, 27 Digest (Repl) 625, 5846.

Interlocutory appeal

This was an appeal by the husband, Thomas Melville Tumath, to vary the order of his Honour Judge Grat dated 23 July 1969, whereby in an application by the wife, Pamela Sophy Tumath, for maintenance, which arose out of an undefended divorce decree pronounced in the exercise of the court’s discretion in her favour, the question arose whether allegations sought to be made by the husband against the wife in answer to her application should be adduced in evidence. It was ordered by the judge that none of the allegations was admissible. The question had been referred by the registrar to the judge on 13 March 1969. The facts are set out in the judgment of Salmon LJ.

J C Mortimer QC and P T H Morgan for the husband.

N Lermon QC and Quintin Iwi for the wife.

Cur adv vult

2 December 1969. The following judgments were delivered.

SALMON LJ. On 11 July 1959 the appellant husband married the wife, the respondent to this appeal. There are no children of the marriage. On 4 September 1968, the wife petitioned for divorce on the ground of the husband’s adultery praying the court to exercise its discretion in respect of her own adultery committed during the marriage. The petition alleged adultery by the husband with Mrs Doreen Lucy Knight on numerous dates between March 1968 and the date of the petition and it, of course, contained the usual allegations that the petitioner had not in any manner been accessory to or connived at or condoned the husband’s adultery and did not present the petition in collusion with him or with Mrs Knight.

The wife, in her discretion statement dated 21 October 1968 said that the husband had told her in 1966 of occasions when he had had sexual intercourse with a Mrs Rawlins; she also said that the husband had advised and encouraged her to have sexual intercourse with Mr Rawlins and that as a result of what the husband had said to her she did have sexual intercourse with Mr Rawlins on four occasions in 1966. A notice was served on the husband by the wife’s solicitors dated 25 October 1968 in the following terms:

Page 113 of [1970] 1 All ER 111

‘WE HEREBY GIVE YOU NOTICE that the [wife] in her Discretion Statement alleges that the [husband] Thomas Melville Tumath conduced her adultery with Mr Peter Rawlins AND FURTHER that her Discretion Statement contains an allegation that the [husband] admitted his adultery with Margaret Rawlings the wife of the said Peter Rawlins.’

The husband did not defend the petition. Indeed he had no defence to any of the allegations it contained and, as the marriage had irretrievably broken down, he had no wish that the court should refuse to exercise its discretion in his wife’s favour. On 22 November 1968, the petition was heard and after evidence by the wife (including evidence verifying her discretion statement) and evidence by an enquiry agent, a decree nisi was duly pronounced. When subsequently the wife’s proceedings for maintenance came before the county court registrar, it became apparent that the husband wished to give evidence: (1) that the wife had deserted him in June 1967 before his adulterous association with Mrs Knight commenced; (2) that he had not conducted to the wife’s adultery; and (3) that he had not confessed to any adultery with Mrs Rawlins. It was contended on behalf of the wife that the husband was precluded from giving such evidence. The registrar adjourned the matter to the learned county court judge for decision. The learned county court judge decided in favour of the wife and ruled that the husband was precluded from giving evidence of any of the three matters to which I have referred. From that decision the husband now appeals.

The learned county court judge seems to have based his decision partly on the rule of res judicata but chiefly on a wider ground of public policy. I will deal first with res judicata.

‘Every judgment is conclusive proof as against parties and privies of facts directly in issue in the case, actually decided by the court, and appearing from the judgment itself to be the ground on which it was based.’

Sir J FitzJames Stephen’s Digest of the Law of Evidencea cited by Lush J in Ord Ord ([1923] 2 KB 432 at 440, [1923] All ER Rep 206 at 211). The decree in the present case was based on the facts alleged in the petition and inferentially admitted by the husband. It is clear therefore that he could not in the maintenance or any other proceedings deny that he had committed adultery with Mrs Knight from March 1968, onwards nor allege that the wife had condoned or connived at or was an accessory to this adultery or allege that the wife’s petition was presented in collusion with him. But this he does not seek to do. It is true that the desertion which he now wishes to set up as conduct to be taken into account on the wife’s application for maintenance might theoretically have been a discretionary bar to the wife’s obtaining a decree on the ground of his adultery although it could not have been a ground for his obtaining a decree as it occurred less than three years before the presentation of the petition. Since his marriage had completely broken down the husband was in my judgment entitled to take the view that no court would refuse the wife a decree because of the desertion on which he now seeks to rely in the maintenance proceedings. It would therefore, in my view, have been a waste of time and money to attempt to defend the suit on the ground that the wife had deserted him. The fact that he did not do so does not in my judgment preclude him under the rule of res judicata from relying on the wife’s desertion, if he can prove it, as relevant conduct to be taken into account in the maintenance proceedings.

As for the allegations made in the wife’s discretion statement, these were no part of the lis between the wife and himself. Whether or not the court will exercise its discretion in favour of a party who has put in a discretion statement admitting adultery is a matter between the court and that party. It is no part of the res which the court adjudicates on as between the parties. It may be that if the husband (who is not

Page 114 of [1970] 1 All ER 111

shown the discretion statement but only given notice of the barest outline of its contents) had asked for leave to be allowed to defend the petition, he might possibly have succeeded in persuading the court to refuse the wife a decree because of her lack of candour. I cannot accept however, that if he does not make this attempt he is subsequently precluded by the rule of res judicata from challenging in maintenance proceedings any allegation which the discretion statement may contain. Indeed counsel for the wife has very properly conceded that he cannot support any part of the learned county court judge’s decision insofar as it is based on res judicata.

I turn now to consider the more general ground of public policy on which the learned county court judge chiefly based his decision. It is well settled that in exercising discretion in proceedings for permanent maintenance it is of the utmost importance for the court to have regard to the conduct of the parties: Restall v Restall. Indeed in Wood v Wood Lindley LJ placed the conduct of the parties first in order in his enunciation of the circumstances which have to be taken into account in such a case. In Robinson v Robinson the point was canvassed for the first time that a husband is precluded on grounds of public policy from setting up his wife’s adultery in proceedings for maintenance if he has failed to defend the petition on which she obtained a decree of divorce. In that case Henn-Collins J decided that the point was a good one. He held that it was against public policy to allow a husband to raise allegations of adultery in maintenance proceedings to free himself of liability to support his wife when, in the divorce suit, he had stood by and refrained from using evidence which he had or which but for his carelessness he might have had about his wife’s adultery. In Duchesne v Duchesne Pearce J, in a passage in his judgment which was not strictly necessary for the decision, expressed qualified approval of Henn Collins J’s judgment in Robinson v Robinson. Pearce J said ([1950] 2 All ER at 791, [1951] P at 113):

‘… he [the husband] is, for reasons of public policy, prohibited from asserting matters (of which he knew) which would reasonably have been expected, if proved, to provide an effective answer to the petition or to produce a different result at the trial (e.g., mutual decrees instead of a decree to the wife alone, or a discretionary decree instead of a decree as of right).’

In Field v Field Wrangham J (rightly in my view) refused to recognise the existence of any rule of public policy as enunciated for the first time by Henn Collins J, or as later approved with a qualification by Pearce J. For my part I am satisfied that at any rate today public policy does not require the existence of such a rule and I doubt whether it ever did. I recognise that for better or for worse the public attitude towards divorce has undergone profound changes over the last 20 years and what may possibly have been properly recognised as a rule of public policy in 1943 or 1951 is not necessarily valid in 1969. Even 20 years ago in Trestain v Trestain ([1950] P 198 at 202) Denning LJ said:

‘… the fact that the husband has obtained this decree does not give a true picture of the conduct of the parties. I agree that the marriage has irretrievably broken down and that it is better dissolved. So let it be dissolved. But when it comes to maintenance, or any of the other ancillary questions which follow on divorce, then let the truth be seen.’

When a marriage has irretrievably broken down and it is obvious that it will be dissolved it seems to me to be wrong that a great deal of public time and money should be spent in deciding which of the parties is to be granted the decree or whether perhaps they should both be granted a decree. Still less is a respondent obliged to spend time and money in calling evidence whether or not facts may exist which

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might theoretically entitle the court in its discretion to refuse a decree. Everyone knows that until comparatively recently divorce cases have habitually been hotly contested in public at great expense to the parties or to the legal aid fund solely for the purpose of securing a supposed benefit for one or other of the parties in future maintenance or custody proceedings. This cannot in my view serve any useful purpose and may indeed be properly regarded as contrary to modern concepts of public policy.

In Porter v Porter this court has recently pointed out that a spouse does not now prejudice his or her chances in future custody or maintenance proceedings by not pursuing a prayer at the hearing of the divorce case or, I would add, by refraining from an attempt to set up matters which might theoretically have constituted a discretionary bar to the decree. Accordingly, in the present case, the marriage having irretrievably broken down, the husband is not in my judgment precluded by any rule of public policy from alleging desertion by the wife when the conduct of the parties is being investigated in the proceedings for maintenance. Counsel for the wife has rightly conceded that the husband is not precluded on grounds of public policy from denying any of the allegations made against him by the wife in her discretion statement. Indeed the learned county court judge did not so hold. He concluded, however, that the husband was precluded from doing so by the rule of res judicata. For the reasons stated earlier in this judgment I cannot agree with that conclusion. I would accordingly allow the appeal.

EDMUND DAVIES LJ. The maintenance proceedings which are the subject of this appeal are quite different from the suit in which the wife was granted a decree of dissolution—see Mould v Mould ([1933] P 76 at 82, [1933] All ER Rep 122 at 125) per Bateson J. In the latter, the wife pleaded that the husband had committed adultery with Mrs Knight (the second respondent) from March 1968 onwards. The notice based on the wife’s discretion statement, served on the husband pursuant to r 36(5) of the Matrimonial Causes Rules 1968b, alleged merely that he: (1) ‘conduced her adultery with Mr Peter Rawlins’; and (2) ‘that the [husband] admitted his adultery with Margaret Rawlins the wife of the said Peter Rawlins’. No dates were given but in the discretion statement itself the wife claimed that from June 1966, the husband encouraged her to commit adultery with Mr Rawlins, that between September and November 1966 she committed adultery four times with Mr Rawlins, and that either in August or September of that year the husband told her that he had committed adultery with Mrs Rawlins.

None of these details could have been ascertained by the husband without defending the suit. He chose not to do so, and one can understand his adopting this course in view of the complete break-down of the marriage. But, having allowed the wife’s petition to go undefended, the county court judge held that in her maintenance proceedings the husband cannot claim: (1) that she deserted him in June 1967, and that it was only (as the husband’s affidavit put it)—‘Sometime after 1967 by which time it had become abundantly clear that my marriage was at an end [that] I began an adulterous association with [Mrs Knight] … ’; (2) that he did not conduce to her adultery with Mr Rawlins; (3) that he did not admit or commit adultery with Mrs Rawlins.

The exclusion of these matters was based by the county court judge on two grounds: (a) estoppel per rem judicatam; and (b) public policy. But counsel for the wife has abandoned any reliance on the former, and wisely so. None of these three topics was an issue between the parties in the divorce proceedings, and accordingly they have never hitherto been investigated. Even if the wife did desert the husband in June 1967, this would have afforded him no defence in relation to his admitted

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adultery with Mrs Knight from March 1968 onwards: see Herod v Herod ([1938] 3 All ER 722 at 729, 730, [1939] P 11 at 21) and Richards v Richards ([1952] 1 All ER 1384 at 1386, [1952] P 307 at 310). The husband accordingly never raised it, and there was no adjudication on this issue at all. As to the second and third points which the husband now seeks to raise, these could (at most) go only to the question of how the court should exercise its discretion in relation to the wife’s admitted adultery with Mr Rawlins; and the decision to grant her a decree did not make either of these points an issue between the parties to the proceedings so as to constitute either of them res judicata once the decree was pronounced.

Counsel for the wife does, however, contend that public policy demands that the husband is debarred from alleging that the wife deserted him in 1967. I am not sure that I follow why he nevertheless, at the same time, concedes that public policy does not also bar the husband from canvassing the other two points which the county court judge held should be excluded. Be that as it may, I am satisfied that such finding is, with respect, insupportable, and that counsel for the wife is right in not seeking to uphold it. But he submits that the husband’s allegation of desertion by the wife in 1967 has to be regarded differently. In essence, his submissions may be summarised in this way: if the husband’s allegation is right, public policy required him to resist the wife’s petition; whether or not marriages should be dissolved is a question in which the State, as well as the parties, is vitally concerned; and the common weal is impaired were one spouse (knowing that a false case was being presented to the court by the other) free to allow the proceedings to go to finality simply because this was convenient to him, and yet be permitted to present to the court a materially different version of the domestic history if later it suited him to do so.

Authority either way is scanty and none of it is binding on this court. Robinson v Robinson and Duchesne v Duchese afford support for counsel for the wife’s contention, while Field v Field in effect denies its validity. Having some sympathy with the view expressed by Bateson J in Mould v Mould ([1933] P at 82, [1933] All ER Rep at 125) that:

‘… it is most inconvenient and undesirable that a husband should be allowed to lie by, with all these charges, until the maintenance petition comes on to be heard.’

I have not found this matter of public policy entirely free from difficulty. Nevertheless, I have come down firmly against counsel for the wife’s contention. ‘The conduct of the parties’ is the first of the several circumstances listed by Lindley LJ in Wood v Wood ([1891] P 272 at 276, [181–94] All ER Rep 506 at 508) as relevant to matters of maintenance. A comparison of the wife’s petition, discretion statement, and affidavit in support of her present application gives rise to a host of highly material questions regarding her own conduct, as well as that of the husband. I do not desire to give any indication of their nature, but they must inevitably arise and I do not see how they can receive proper consideration if the husband is to be gagged from asserting that the wife unjustifiably left him in mid-1967. Nor did anything that happened before decree absolute lead the husband to suppose that he would be gagged. On the contrary, the statutory form of acknowledgement of service appended to the Matrimonial Causes Rules 1968c, contains the following question: ‘Even if you do not intend to defend the case, do you wish to be heard on the claim[s] made in the petition for … (e) maintenance?’ Such a query would be regarded by a reasonable man as implying that, short of denying the matrimonial offences alleged in the petition, he would be free to raise

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in the maintenance proceedings all matters relevant thereto even though he did not defend the main suit.

So far from the public policy preventing all the facts relevant to the conduct of the parties being presented to the court, I think it positively requires their admission. The reason for so holding was stated by Denning LJ in Trestain v Trestain ([1950] P 198 at 202) and his well-known trenchant words were adopted by Sachs LJ when in Porter v Porter ([1969] 3 All ER 640 at 644, [1969] 1 WLR 1155 at 1159) he said:

‘… it is now commonly accepted that a decree based on a matrimonial offence, whilst of course establishing the factum of that offence, is often of little and sometimes of no importance in reaching conclusions as to whose conduct actually broke up the marriage.’

That question is of vital importance in these maintenance proceedings and it would in truth be contrary to public policy were the husband now to be restricted as counsel for the wife submits he should be. It therefore follows that in my judgment Robinson v Robinson was wrongly decided.

I would only add a few words as to Duchesne v Duchesne ([1950] 2 All ER at 791, [1951] P at 113) where Pearce J said that in maintenance proceedings the husband would be:

”… for reasons of public policy, prohibited from asserting matters (of which he knew) which would reasonably have been expected, if proved, to provide an effective answer to the petition or to produce a different result at the trial (e.g., mutual decrees instead of a decree to the wife alone, or a discretionary decree instead of a decree as of right).’

As has already been observed, in the present case the alleged desertion by the wife would have provided no answer to her petition and her admitted adultery disentitled her to any decree as of right. More pertinent to such cases as the present is a later passage in the same judgment of Pearce J in which he said ([1950] 2 All ER at 791, [1951] P at 114):

‘There are cases where the earlier conduct of the wife has contributed to the final break-up of the marriage although such conduct would provide no effective answer to the petition and would not amount to conduct conducing. It is not just that such conduct should be put beyond the scope of criticism.’

With those observations I am in respectful agreement. In the light of them, I would be for holding the husband entitled to adduce evidence regarding all three topics excluded by the learned county court judge and I would accordingly concur in allowing the appeal.

SIR GORDON WILLMER. By her petition dated 4 September 1968 the wife prayed for a decree of divorce on the ground of the husband’s adultery with a Mrs Knight. Both the husband ad Mrs Knight signed statements confessing that they had carried on an adulterous association from March 1968 onwards. The wife prayed for the exercise of the court’s discretion in her favour, and filed a discretion statement whereby she admitted having committed adultery with a Mr Rawlins during the period from September to November 1966. Her discretion statement also contained allegations tending to show that the husband had actively sought to promote her association with Mr Rawlins, and had admitted that he himself had committed adultery with Mrs Rawlins. The wife left the husband in July 1967, and there has been no cohabitation since. In an affidavit which the wife has sworn she says

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that she left because of the husband’s conduct, as already described, and because the husband specifically said that he wanted her to leave.

On 25 October 1968, the wife served on the husband a notice under r 36(5) of the Matrimonial Causes Rules 1968, informing him that her discretion statement contained allegations that he had conduced to her adultery with Mr Rawlins and that he had admitted having committed adultery with Mrs Rawlins. No particulars of these allegations were given in the notice, which was in quite general terms. The husband took no action and did not defend the wife’s petition. In the result the wife was, on 22 November 1968, granted a decree nisi of divorce by his Honour Judge Granville Smith, the court exercising discretion in her favour.

Proceedings for maintenance have now been instituted by the wife, and in those proceedings the husband seeks to set up that the wife deserted him. He also seeks to deny that he conduced to the wife’s admitted adultery, or that he ever admitted that he himself had committed adultery with Mrs Rawlins. These contentions are plainly of the utmost relevance in considering the conduct of the parties, which is one of the matters to which the court is specifically required to have regard in awarding maintenance. On behalf of the wife, however, it has been contended that it is not now open to the husband, having taken no part in the divorce proceedings, to allege that the wife deserted him or to deny the allegations contained in the wife’s discretion statement, to the truth of which the wife swore at the trial, and which must be taken to have been accepted by the trial judge. The learned registrar, when the wife’s claim for maintenance came before him on 13 March 1969 adjourned to the judge the question whether the husband could be allowed to raise these matters on the hearing of the maintenance proceedings. The matter then came before his Honour Judge Grant, who by his order of 23 July 1969 ruled that on the preliminary question referred to him the husband was not entitled to adduce evidence relating to any of the three matters that he wished to raise. From that order the husband now appeals with leave.

It is plain that if the husband had been minded to take part in the trial of the suit he could not in any circumstances have obtained a decree in his favour on the ground of desertion, since the necessary period of three years will not have elapsed until July 1970. It is possible, however, that if the husband had given evidence in support of the matters now sought to be set up the trial judge might have been persuaded not to exercise his discretion in favour of granting relief to the wife. This would no doubt have been the last thing that the husband would have desired, since he no doubt wished that the marriage should be dissolved—however that might be brought about—so that he could be free to regularise his position by marrying Mrs Knight, with whom he has now set up home.

The case for the wife was put in two ways. First, it was contended that the husband is estopped per rem judicatam from asserting that the wife deserted him. Secondly, in reliance on Robinson v Robinson and Duchesne v Duchesne it was said to be contrary to public policy to allow the husband, having taken no part in the trial and having allowed the wife’s petition to go undefended, to raise in maintenance proceedings matters which, if brought to light at the trial, might have affected the trial judge’s exercise of his discretion in favour of granting relief to the wife.

The first of these contentions will not, I think, bear examination, and during the course of the argument before us it was abandoned by counsel for the wife. I think that his concession was rightly made. As between the parties the only res on which the learned trial judge adjudicated was the wife’s allegation that the husband had committed adultery. There was no issue as between the parties as to the circumstances of the parting, nor was there any specific finding by the court with regard thereto. The question whether or not discretion should be exercised in favour of granting relief was a matter between the wife petitioner and the court, and was in no sense an issue between the parties, so as to justify a plea of res judicata.

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With regard to the alleged principle of public policy, this was first formulated by Henn Collins J in Robinson v Robinson. In that case the wife had obtained a decree on the ground of the husband’s adultery. In subsequent maintenance proceedings the husband sought to set up that the wife had also committed adultery. The learned judge held that, although such adultery if proved might have afforded an answer to the petition and would in any case have affected the type of decree granted, the issue as to such adultery was not ([1943] P at 44, [1943] 1 All ER at 252) ‘fundamental to the decree nor necessarily involved in it’. There was therefore no ground for alleging res judicata. But the case had been argued on the alternative basis of public policy, and with regard to that Henn Collins J held that ([1943] P at 45, [1943] 1 All ER at 253):

‘… a party ought not to be allowed to refrain from using at the hearing of a suit for divorce information which he had, or which, but for his carelessness, he might have had, and then, when his pocket begins to be affected, propose to prove that information … ’

The matter of public policy was next considered in Duchesne v Duchesne. In that case, the wife having obtained a decree on the ground of desertion, the husband sought in subsequent maintenance proceedings to adduce evidence, inter alia, of failure on the part of the wife to respond to overtures of reconciliation. It was held by Pearce J that such evidence was inadmissible. He said that for a husband to allow a petition on the ground of desertion to go undefended and then in maintenance proceedings to say that the parting was consensual, or that it was the wife who deserted him ([1950] 2 All ER at 790, 791, [1951] P at 113), ‘offends both against the rule of estoppel and also against public policy since it is a fraud on the court’. A little later the learned judge went on ([1950] 2 All ER at 791, [1951] P at 113, 114):

‘In my view, the correct principles (and they are the principles to be drawn from the judgment of SIR BOYD MERRIMAN, P., in Lindsay v. Lindsay and from that of HENN COLLINS, J., in Robinson v. Robinson which was founded on it) are these. The husband is estopped in maintenance proceedings from asserting matters inconsistent with the decree. Further, he is, for reasons of public policy, prohibited from asserting matters (of which he knew) which would reasonably have been expected, if proved, to provide an effective answer to the petition or to produce a different result at the trial (e.g., mutual decrees instead of a decree to the wife alone, or a discretionary decree instead of a decree as of right). I am not satisfied that this further prohibition extends to matters of which he was ignorant at the time of the trial, but which he might have known “but for his carelessness”, to quote the words of HENN COLLINS, J.‘

In Hull v Hull Sachs J, while not expressing any dissent from Pearce J’s view with regard to public policy, held that the principle did not apply in custody proceedings, since in such proceedings the welfare of the children introduces an additional factor touching public policy. Finally, in Field v Field, a view contrary to that expressed by Henn Collins J and Pearce J was put forward obiter by Wrangham J. In that case a wife respondent obtained a decree on her answer on the ground of adultery. The husband had presented a petition alleging adultery on the part of the wife. But he elected not to proceed on his petition, allowing the case to go undefended on the wife’s answer. The wife in giving evidence denied on oath that she had committed adultery. In subsequent maintenance proceedings the husband sought to set up the same charge of adultery as he had previously abandoned. It was held that the husband was estopped per rem judicatam, since his prayer based on the

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wife’s alleged adultery had been rejected at the trial, and the court must be taken to have found that she had not committed adultery. Although it was not necessary for his decision, Wrangham J went on to express the view that there is no rule of public policy to prevent the adducing of such evidence where there is no estoppel, and he expressly declined to follow the decision of Henn Collins J in Robinson v Robinson.

These four cases are the only cases cited to us in which the alleged rule of public policy has been specifically considered. It will be seen that all four cases were at first instance, and none of them is binding on this court. Duchesne v Duchesne can be supported on the ground of estoppel per rem judicatam, as found by Pearce J. Hull v Hull does not in my view carry the matter any further, since the actual decision went off on another point, namely the importance of considering the welfare of the children in custody proceedings. We are left, therefore, with the diametrically opposing views expressed by Henn Collins J in Robinson v Robinson and by Wrangham J i Field v Field. So far as I am aware this is the first case in which the alleged principle of public policy has had to be considered by this court.

I have come to the clear conclusion that in cases, such as the present, where there is no ground for holding that there is an estoppel per rem judicatam, there is no principle of public policy which inhibits the right of the parties to bring to light in maintenance proceedings all matters relevant to the conduct of the parties, whether or not they have been raised at the trial of the suit. As long ago as 1930, Lord Hanworth MR in Restall v Restall ([1930] P 189 at 195, [1930] All ER Rep 372 at 374) in a judgment with which the other members of the court expressed their concurrence, stated the principle in the following terms:

‘… I think it is most important that the Court should have before it the relevant evidence to enable it to investigate thoroughly the conduct of the parties.’

Since that date this principle has been regularly applied, and I think it is most important to preserve it.

If there is any room for doubt, I think that that doubt is removed by the recent decision of this court in Porter v Porter. It is true that in that case the alleged principle of public policy propounded by Henn Collins J in Robinson v Robinson was not specifically considered. But it seems to me that the whole rationale of the decision is against the existence of any such principle of public policy. It was a case in which a wife had petitioned for divorce on the ground of cruelty. The husband by his answer denied that he had been guilty of cruelty, and cross-prayed for a decree of divorce on the ground of the wife’s adultery, which she did not deny. Before the trial, as the result of discussions between the parties, a consent order was obtained whereby the wife’s prayer for relief was struck out, although her allegations of cruelty remained on the file. The case then went undefended on the husband’s answer, and he was granted a decree on the ground of the wife’s adultery. At the trial evidence was given that the marriage had already broken down before the wife’s adultery, but there was no investigation with regard to her charges of cruelty against the husband. In subsequent maintenance proceedings the wife again raised the same allegations which had formed the basis of her charge of cruelty as matter relevant to be considered in relation to the conduct of the parties. Sachs LJ in delivering the leading judgment, with which the other members of the court expressed their concurrence, said ([1969] 3 All ER at 644, [1969] 1 WLR at 1159):

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‘… it is now commonly accepted that a decree based on a matrimonial offence, whilst of course establishing the factum of that offence, is often of little and sometimes of no importance in reaching conclusions as to whose conduct actually broke up the marriage. As early as 1950 DENNING, L.J., in Trestain v. Trestain [[1950] P 198 at 202] said: “I desire to say emphatically that the fact that the husband has obtained this decree does not give a true picture of the conduct of the parties. I agree that the marriage has irretrievably broken down and that it is better dissolved. So let it be dissolved. But when it comes to maintenance, or any of the other ancillary questions which follow on divorce, then let the truth be seen”’.

I have ventured to underline that last sentence, which seems to me to be of vital significance. Sachs LJ went on ([1969] 3 All ER at 644, [1969] 1 WLR at 1159):

‘The second factor is this, that the adultery of the wife against whom a decree has been granted may be of great or it may be of little significance according to the background … Next, the present case is one which, but for the consent order of May 1968, might have entailed a lengthy trial at great cost to the community and ended with decrees to both parties, had the findings been so warranted. It is important for it to be clear that counsel can properly advise, as they often do and as has been endorsed by this court, that, by taking a course of not pursuing a prayer, the spouse who takes it does not prejudice his or her chances of success on ancillary matters such as custody and maintenance, which will probably have to be investigated later. These ancillary (a euphemistic word) matters are often those which are at the very heart of the real issues with which the parties are concerned.’

Accepting, as I do, that this is a correct statement of the principle involved, I cannot think that there is any room for a rule of public policy inhibiting parties from raising in maintenance proceedings matters relating to the conduct of the parties, even where such matters could have been raised on the trial of the suit, provided that there is no ground for holding that there is an estoppel per rem judicatam as between the parties. This is a matter which, I apprehend, is likely to become one of increasing importance if and when the new Matrimonial Causes Act comes into force; it is likely that when decrees of divorce can be granted on mere proof of break-down of the marriage, the real disputes between the parties will only emerge in the course of subsequent ancillary proceedings.

I am of the opinion that Robinson v Robinson was wrongly decided and should be overruled. In following that decision, therefore, the learned county court judge in my judgment reached a wrong conclusion. I would allow the appeal.

Appeal allowed.

Solicitors: Prentice Kirkwood & Co (for the husband). Hanchett Copley & Hails, Edgware (for the wife).

Wendy Shockett   Barrister.

Hissett and Another v Reading Roofing Co Ltd

[1970] 1 All ER 122

Categories:        LAND; Sale of Land        

Court:        CHANCERY DIVISION        

Lord(s):        STAMP J        

Hearing Date(s):        30 JUNE, 1, 2, 17 JULY 1969        

Sale of land – Contract – Condition – Condition to which effect not given by conveyance but capable of taking effect after completion – Condition requiring vacant possession on completion – Failure to give vacant possession – Breach of contract for sale – Law Society’s Conditions of Sale 1953, condition 33.

The defendants, by a written contract, agreed to sell to the first plaintiff property comprising offices, depot space and a flat; the property was sold subject to the special condition that vacant possession be given on completion. Condition 33 of the Law Society’s Conditions of Sale 1953 (‘Notwithstanding the completion of the purchase any General or Special condition or any part or parts thereof to which effect is not given by the conveyance and which is capable of taking effect after completion … shall remain in full force and effect’) also applied. The contract was completed and on the direction of the first plaintiff it was transferred to the second plaintiffs, a company. The plaintiffs were unable to get vacant possession of the whole property because the flat was at all material times occupied by a protected tenant. The plaintiffs claimed damages for breach of the sale agreement.

Held – The first plaintiff was entitled to damages for breach of contract because the defendants failed to give vacant possession in accordance with the special condition which was (in the words of condition 33) a condition ‘to which effect’ was ‘not given by the conveyance’ and was ‘capable of taking effect after completion’; further the condition did not merge with the conveyance which covered only part of the ground covered by the contract for sale (see p 127 a and h, and p 127 j, to p 128 a, post).

Palmer v Johnson [1881–85] All ER Rep 719 applied.

Notes

For merger of preliminary contract into a deed, see 11 Halsbury’s Laws (3rd Edn) 399, para 648, and for cases on the subject, see 17 Digest (Repl) 345–349, 1519–1562.

Cases referred to in judgment

Greswolde-Williams v Barneby (1900) 83 LT 708, 17 Digest (Repl) 346, 1537.

Lawrence v Cassell [1930] 2 KB 83, [1930] All ER Rep 733, 99 LJKB 525, 143 LT 291, 40 Digest (Repl) 380, 3052.

Leggott v Barrett (1880) 15 Ch D 306, 51 LJCh 90, 43 LT 641, 17 Digest (Repl) 347, 1538.

Palmer v Johnson (1884) 13 QBD 351, [1881–85] All ER Rep 719, 53 LJQB 348, 51 LT 211, 17 Digest (Repl) 347, 1539.

Cases also cited

Beard v Porter [1947] 2 All ER 407, [1948] 1 KB 321.

Cumberland Consolidated Holdings Ltd v Ireland [1946] 1 All ER 284, [1946] KB 264.

Action

This was an action by the plaintiffs, Sydney Frederick Hissett and Hissett Property & Investment Co Ltd, for damages for breach of a contract for sale of premises known as Stanley House, no 172 Wantage Road, Reading, Berkshire, made between the first plaintiff and the defendants, Reading Roofing Co Ltd. The facts are set out in the judgment.

G M Godfrey for the plaintiffs.

J R Cherryman for the defendants.

Page 123 of [1970] 1 All ER 122

Cur adv vult

17 July 1969. The following judgment was delivered.

STAMP J read the following judgment. This action arises out of the purchase by the first plaintiff from the defendants in the autumn of 1966 of a freehold property known as Stanley House, no 172 Wantage Road, Reading. Speaking broadly, that property comprised 11 offices on the ground floor of a floor space of 1,400 square feet, a depot space of an area of 3,000 square feet and a staging of 620 square feet and, on the first floor, an office board room and flat. The flat was in the occupation of a Mr and Mrs Martin who are the parents-in-law of a Mr Roberts who was the managing director of the defendants. It is convenient to say at once that Mr Martin at the time of the purchase acted as the caretaker of the premises and did other work about the place. It is the occupation of the flat by the Martins which has given rise to this action.

It was a term of the contract for the sale of the property that vacant possession should be given on completion. The first plaintiff completed the purchase notwithstanding that the Martins were still in the flat, and the property was conveyed to the second plaintiffs by the direction of the first plaintiff. It is the plaintiffs’ case that this was done to oblige Mr Roberts and to give him an opportunity of obtaining other accommodation for the Martins and out of compassion for the Martins who had nowhere else to go, but that thereafter they were there on sufferance. It is, however, the fact, a fact of which the first plaintiff contends that he was unaware until many months after completion but which the defendants contend that they knew from the outset, that the Martins had a tenancy of the flat. Furthermore, that tenancy is a protected tenancy.

The Martins stayed on after the completion of the purchase and eventually set up their tenancy. The plaintiffs’ claim as pleaded was for damages for breach of the sale agreement, the breach consisting of the failure to give vacant possession. Alternatively, the second plaintiffs claimed damages for breach of the implied covenant for quiet enjoyment and title. Had the land not been, as in fact it was, registered land, the second plaintiffs could, so it appears, subject to proof of the facts on which the plaintiffs rely, have succeeded in their alternative claim on the implied covenants, notwithstanding that they knew of the Martins’ presence on the property at the time of the conveyance; but having regard to the terms of the relevant Land Registration Rules 1925a counsel for the plaintiffs felt unable to argue before me that this was not fatal to the second plaintiffs’ claim which accordingly was not proceeded with.

On 12 May 1966, Mr L J Roberts, the managing director of the defendants, instructed Messrs Dunster & Moreton, estate agents, to put the property on the market at £20,000 with vacant possession. Fortunately, Mr Hammond of Dunster & Moreton, who was called as a witness on behalf of the defendants and whose evidence, let me say at once I accept, recorded those instructions in a letter of 13 May 1966 which was not disclosed on discovery but a carbon copy of which Mr Hammond produced in the witness box. Mr Hammond was not made aware at any time during the course of the negotiations with the first plaintiff that the Martins had a tenancy of the flat. Indeed, remarkably enough, he was not aware of this fact until about half-an-hour before he went into the witness box. When he came to prepare the particulars which estate agents prepare to hand to prospective purchasers, those particulars included the statement that the property was offered with vacant possession.

During June and July, the first plaintiff paid several visits to the premises. At an early stage it was made clear to him by Mr Roberts that the flat was in the occupation of Mr and Mrs Martin who were the parents-in-law of Mr Roberts. Mr Roberts expressed reluctance to take the first plaintiff to see the flat because he did not want, until it was necessary, to let the Martins know that they would have to move. Mrs Martin is, it appears, a frail lady. Mr Roberts asserts that he told the first plaintiff

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at the early stage that Mr and Mrs Martin held the flat under a tenancy agreement and that he told him also that the rent was £2 10s per week. At one point in his evidence he stated that he showed the first plaintiff the rent book and told him that if he wanted vacant possession he, Mr Roberts, would have to find alternative accommodation for the Martins. Mr Roberts also asserted in his evidence that he told the first plaintiff that Mr Martin acted as a caretaker and did odd jobs at the premises and was paid 25s per week, I think it was, for such duties. On one at least of his early visits of inspection the first plaintiff was accompanied by a Mr Dalton. The first plaintiff and Mr Dalton were concerned with a company called Glass Supply & Service (Reading) Ltd and it was for the use of this company that the premises were being acquired. Mr Roberts in his evidence asserts that on the occasion when he told the first plaintiff that Mr and Mrs Martin held the flat under a tenancy agreement and that the rent was £2 10s, Mr Dalton was there in company with the first plaintiff.

Mr P F Gibson of the firm of Martin & Pole, estate agents, was instructed by the first plaintiff to act on his behalf. He, having already visited the property in company with the first plaintiff, wrote to Messrs Dunster & Moreton on 20 July 1966 submitting an offer of £15,000, subject to contract, for the freehold of the property with vacant possession to be given on completion and to the appropriate planning permission to be obtained for a change of user of part of the accommodation offered. He expressed the opinion that such permission, as turned out to be the fact, was likely to be obtained. In the last part of his letter he wrote this:

‘We understand that the upper part is occupied as living accommodation and we would be obliged if you would kindly confirm that the present occupier is on a service tenancy and that vacant possession could be given of the whole property including this accommodation on completion.’

In relation to what I have just read it was suggested to Mr Gibson in cross-examination that he was aware that the Martins had a tenancy. I am satisfied and find as a fact that Mr Gibson very properly and correctly included that paragraph not because he knew, but because he did not know and wanted to find out, the terms on which the flat was in residential occupation. Vacant possession was offered and Mr Gibson wanted to be sure that there was no residential tenancy which would prevent that offer being implemented. I accept Mr Gibson as a fair and truthful witness.

The first plaintiff must have made a further inspection on 20th or 21 July 1966 for on the latter date Mr Gibson wrote to Messrs Dunster & Moreton a further letter submitting a higher offer. His letter reads as follows:

‘Following our telephone conversations and correspondence of yesterday and [the first plaintiff’s] subsequent inspection of the property, we write to confirm that we have been instructed to submit an offer for [the defendants] consideration as follows: (1) £16,000 subject to contract; (2) Vacant possession of the whole property being given on completion: (3) Price to include the floor coverings as fitted throughout the property, light fittings and water heaters; (4) The offer is made subject to planning permission being obtained, a point which has been referred to in previous correspondence. We would be obliged if you would kindly confirm if this offer is acceptable to [the defendants’] and if so [the plaintiffs] are prepared to instruct their solicitors forthwith with the genuine hope of being able to sign and exchange contracts with the minimum of delay.’

On the following day Mr Gibson came forward with a further offer. In his letter of 22 July he referred to a telephone conversation of the previous evening and stated that in order to avoid any misunderstanding:

‘We confirm that you have now received [the defendants’] instructions to sell

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the freehold of the above property for the sum of £17,500, subject to contract, and with vacant possession to be given of the whole property.’

He then went on to state that he had had the opportunity of discussing the matter with the plaintiffs and was instructed to write stating that they were prepared now to submit a final offer of £16,500, subject to contract, and to include fixtures, fittings and water heaters as referred to in previous correspondence. He added this:

‘[The plaintiffs] are aware of [the defendants’] difficulty regarding the vacant possession of the flat and we believe that [the plaintiffs] would be prepared to come to some private arrangements with [the defendants] in allowing the present occupier to remain in possession for a time providing such arrangement did not in any way prejudice their rights ultimately in obtaining full vacant possession. We feel sure you will appreciate that this arrangement could be of considerable assistance to [the defendants] by saving them from further capital expenditure particularly at this time.’

The offer of £16,500 was accepted in the course of a telephone conversation between the agents on the evening of 22 July; and on 25 July Messrs Dunster & Moreton in a letter to Messrs Martin & Pole wrote confirming that the defendants were prepared to sell the property to the plaintiffs for the sum of £16,500 ‘subject to contract with vacant possession on completion and to [the plaintiffs] obtaining the permission they require for a limited area of light industrial use’.

The matter was then placed in the hands of solicitors for both parties. In the enquiries before contract the plaintiffs’ solicitors asked the question—‘If vacant possession is to be given, when can this be done?’ and received the reply—‘as soon as completion can be arranged’.

A contract was prepared and signed on 14 September 1966, but not before there had been further negotiations regarding the price. A price of £16,000 was orally agreed and according to a note of a telephone conversation with Mr Gibson made by Mr Hammond, Mr Gibson in an endeavour to get a further reduction of £250, quoted occupation of flat and other points. That endeavour however was not successful. The contract was expressed to be made between the defendants of the one part and the first plaintiff of the other part and by that contract it was agreed that the defendants should sell and the first plaintiff should purchase the freehold property for £16,000. The property was sold subject to the Law Society’s Conditions of Sale 1953 and among the special conditions of sale was the provision that the date fixed for completion was 1 November 1966 and that the property was sold with vacant possession on completion. On 1 November 1966, pursuant to a direction given by the first plaintiff, the property was transferred to the second plaintiffs and the purchase money paid. Mr and Mrs Martin were still in occupation of the flat.

It is not part of the defendants’ case that their agents or solicitors were made aware of the existence of the Martins’ tenancy; but, as I have said, Mr Roberts’ evidence was that the first plaintiff and Mr Dalton were told of it before the contract was entered into. Mr Roberts asserts moreover that a conversation took place between him and the first plaintiff in the course of which the first plaintiff said in effect that he, the first plaintiff, wanted the Martins to stay on. If I understand Mr Roberts, evidence correctly, it was to this effect: he had been trying to find accommodation for his parents-in-law and in September looked for a flat which might suit them but without success. Then, at a date which he fixed at the end of September or early October, there was a conversation at which the tenancy of a firm called Earlswood Heating Co and that of the Martins was discussed. Earlswood Heating Co had a three-monthly tenancy of two offices and a store, and apparently had not been given notice to quit. No alternative accommodation had been found for the Martins. According to Mr Roberts’ evidence the first plaintiff in discussing these matters with Mr Roberts told Mr Roberts not to be in too much of a hurry, that he only required a couple of

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offices and nothing like the amount of flooring area which he would be getting, and the rents would be handy towards the rates. In effect, according to Mr Roberts’ evidence, it was arranged that the two tenants should remain as the plaintiffs’ tenants. He, Mr Roberts, then took the first plaintiff to the office of Earlswood Heating Co and introduced him to a Mr Borland, and then on to the flat to meet the Martins, and told the Martins that the first plaintiff wanted them to stay there under the same conditions as before. Mr Borland gave evidence which I accept, and what in fact happened so far as the Earlswood Heating Co was concerned was that at some time about the end of September the first plaintiff was introduced to Mr Borland and told Mr Borland that he would be pleased if he continued the tenancy of the offices, but as regards storage space that was required by the plaintiffs, and he made an offer of alternative accommodation for this purpose elsewhere. This, however, was not acceptable to Mr Borland. Earlswood was, however, allowed to stay on temporarily and they left in March 1967. Mr Martin, a truculent witness, who (not surprisingly I thought) came into collision with the first plaintiff or Mr Dalton not long after completion, gave evidence on which I felt unable to rely.

I took a most unfavourable view of Mr Roberts as a witness. I preferred the evidence of the first plaintiff and Mr Dalton, both of whom I thought were telling the truth, and I find as a fact that Mr Roberts did not tell either of them that the Martins had a tenancy or mentioned any rent. That the first plaintiff was aware that the Martins occupied the flat and that Mr Martin performed the duties of a caretaker and did odd jobs for the defendants is not in question. Nor did Mr Roberts persuade me that there was ever such an agreement regarding the Martins as he alleges was made at the end of September or beginning of October. His evidence carried no conviction, and I thought that his account of the conversation with the first plaintiff was untrue. The conversation was not pleaded in the defence as having taken place in the autumn but as having taken place in July, which would not fit in either with Mr Borland’s evidence, which I accept, or with Mr Roberts’ own evidence that he was trying to rehouse the Martins in September. Application to amend the defence, so as to set up an autumn agreement made after the date of the contract and an estoppel, was made. That application was not made until after the conclusion of the evidence. Counsel for the plaintiffs objected to the amendment on the ground that it raised a new allegation of fact after the close of the evidence. This objection is in my judgment well-founded and I formally refuse the defendants the leave to amend which was sought.

I accept the first plaintiff’s evidence of the reason why the Martins were allowed to stay on. What happened was that much earlier than October, at about the date of Messrs Martin & Pole’s letter of 22 July, the first plaintiff being aware of the problems which faced Mr Roberts in rehousing his in-laws told Mr Roberts that he would allow them, if necessary, to remain in occupation of the flat for a time. The first plaintiff indicated in his evidence that he thought that once the purchase money had been paid Mr Roberts would have the money to rehouse the Martins, and this is of a piece with the rather cryptic remark in Martin & Pole’s letter of 22 July 1966 when, with reference to an arrangement for allowing the Martins to remain in possession, they remarked:

‘We feel sure you will appreciate that this arrangement could be of considerable assistance to [the defendants] by saving them from further capital expenditure, particularly at this time.’

It was however made clear in that letter that the arrangement was not in any way to prejudice the plaintiffs’ rights ultimately to obtain vacant possession.

I find as a fact that it was not until long after 1 November 1966 after correspondence and events which, rejecting as I do Mr Martin’s assertion that he offered rent on two occasions but it was refused, seem to me more consistent with the first plaintiff’s

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evidence that he was unaware of the existence of the tenancy than Mr Robert’s evidence to the contrary, that the Martins in a letter from their solicitors of 20 June 1967 set up the tenancy.

In giving possession subject to a tenancy protected by the Rent Acts and not disclosed to the plaintiffs, the defendants in my judgment failed to give vacant possession and were accordingly in breach of the terms of the contract of 14 September 1966.

It is submitted on behalf of the defendants that the first plaintiff’s rights under the contract were merged in the conveyance which replaced the contract for sale. Once completion has taken place and the property has been conveyed, so the argument runs, a purchaser’s only remedy for a failure to give vacant possession is an action on the implied covenants in the conveyance; and if as a result of the terms of the Land Registration Rules there is no implied covenant to fit the case, the purchaser has no remedy.

It is of course the law of England that if two parties to a simple contract embody its terms in a deed in which they both execute, the simple contract is thereby discharged, just as a simple contract debt is merged in a judgment. One cannot have two agreements covering the same matters at the same time. Suppose, however, that there are matters dealt with in the contract which are not covered by the deed. Bowen LJ pointed out in Palmer v Johnson ((1884) 13 QBD 351 at 357, cf [1881–85] All ER Rep 719 at 722) that parties to a parol contract which has been reduced to writing might intend that there should be something in the contract which should exist notwithstanding that it was not put in the contract in writing. And he remarked ((1884) 13 QBD at 359):

‘In the same way, when one is dealing with a deed by which the property has been conveyed, one must see if it covers the whole ground of the preliminary contract. One must construe the preliminary contract by itself, and see whether it was intended to go on to any, and what, extent after the formal deed had been executed.’

Fry LJ put the matter is a similar way saying ((1884) 13 QBD at 359):

‘In Leggott v Barrett ((1880) 15 Ch D 306 at 309, 311), Lord Justice James and the present Master of the Rolls [Sir Baliol Brett MR] laid down what is indubitably the law, that when a preliminary contract is afterwards reduced into a deed, and there is any difference between them, the mere written contract is entirely governed by the deed, but that has no application here, for this contract for compensation was never reduced into a deed by the deed of conveyance. There was no merger, for the deed, in this case, was intended to cover only a portion of the ground covered by the contract of purchase.’

And so I think here. That the conveyance was intended only to cover a portion of the ground covered by the contract sufficiently appears from condition 33 of the Law Society’s General Conditions of Sale 1953, to which the present sale was made a subject. That condition provides:

‘Notwithstanding the completion of the purchase any General or Special Condition or any part or parts thereof to which effect is not given by the conveyance and which is capable of taking effect after completion … shall remain in full force and effect.’

In my judgment special condition 5 providing that the property is sold with vacant

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possession on completion was in the words of general condition 33 a condition ‘to which effect’ was ‘not given by the conveyance’ and was ‘capable of taking effect after completion’. The fact that the condition was to be performed on completion does not in my judgment preclude it from being a condition ‘capable of taking effect after completion’.

But apart from the effect of condition 33 the provision in the contract regarding vacant possession on completion was not in my judgment a provision which was covered by the conveyance but a matter with which the conveyance was not concerned.

On behalf of the defendants reliance was placed on Greswolde-Williams v Barneby a decision of Wills J. About that case I will say only this: first, if, as the judge appears to have assumed to be the case, there was a warranty in the contract I would find it difficult to reconcile the decision in that case with that of the Court of Appeal in Palmer v Johnson and would have to follow, as I do, the last-mentioned case; and secondly, I would observe that, although the decision of Wills J was cited to the Court of Appeal in Lawrence v Cassell where Palmer v Johnson was applied, that decision was not noticed in any of the judgments.

The first plaintiff is in my judgment entitled at least to nominal damages for breach of the agreement of 14 September 1966.

There is a counterclaim for rectification of the agreement on the ground that prior to the date thereof there was an oral agreement that the sale was to be subject to the quarterly tenancy of Earlswood Heating Co Ltd and the weekly tenancy of Mrs Martin and that the written agreement failed in this respect to give effect to the common intention of the parties. The counterclaim must be dismissed.

Judgment for the first plaintiff.

Solicitors: Richard Seymour, Aram & Co, Reading (for the plaintiffs); Sarjeant, Brown & Co, Reading (for the defendants).

Rosalie Long   Barrister.

Johnson v F E Callow (Engineers) Ltd

[1970] 1 All ER 129

Categories:        HEALTH; Health and safety at work        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        FENTON ATKINSON AND KARMINSKI LJJ AND SIR GORDON WILLMER        

Hearing Date(s):        22, 23, 24 OCTOBER 1969        

Factory – Dangerous machinery – Duty to fence – Part of machinery not dangerous by itself – Danger caused by juxtaposition of workpiece – Factories Act 1961, s 14(1).

A boring operation at a factory was carried out by means of a horizontal boring bar with a cutting tool in one end, which was moved horizontally until the point of the cutting tool was brought into contact with the inner edge of the workpiece. The workpiece was fixed at its opposite end to a revolving chuck, which caused it to revolve in an anti-clockwise direction at 30 revolutions a minute in contract with the cutting tool. As the boring proceeded the boring bar was moved almost imperceptibly to the human eye (so slowly that it was conceded that it could be treated as the equivalent of a stationary part of the machinery), towards the workpiece going further and further into it until the boring operation was completed. According to the exact length of the cutting tool the end of the boring bar came within 3/8 to 1/2 inch of the inner side of the revolving workpiece (the gap between the boring bar and the other side of the revolving workpiece being 4 1/2 inches). No guard was provided. When a stainless steel workpiece was being bored, a coolant was necessary to prevent the cutting tool from overheating, and an automatic coolant system fitted to the machine applied coolant to the tool in a regulated and accurately directed flow. In order to save himself the trouble of cleaning out swarf from the boring of cast iron workpieces requiring no coolant, which was necessary before the coolant system could be used for a stainless steel workpiece, the operator (the plaintiff) intended to use his own ‘squeezie’ to inject coolant to the desired point on the cutting tool in the interior of the workpiece, at a time when the boring bar had almost reached the furthest point of traverse into it. The practice was known to but not approved of by his employers, the defendants. The plaintiff said that when he reached for the squeezie on a flat rectangular plate on the machine, the duckboard on which he was standing seemed to slip under him and as he went forward he grabbed for the boring bar and his hand must have slipped over the top of it and got wedged between it and the bore. Three fingers had to be amputated. The judge disbelieved the story and in the absence of other evidence found it impossible to say that the operator had proved that the use of the squeezie was a reasonably foreseeable cause of injury, with the consequences that there was no breach of s 14(1)a of the Factories Act 1961 and no liability on the part of the defendants.

Held – (i) The defendants were liable to the plaintiff for a breach of s 14(1) of the Factories Act 1961, because—

(a) once they were fixed with the knowledge that their employees, as a convenient short cut and to save themselves trouble, were using squeezies of the nature used, to squirt coolant into the inner sides of the workpieces, they could have foreseen that sooner or later someone might slip or overreach himself or some careless operator might get his hand too far inside the workpiece with the danger of being trapped between the boring bar and the workpiece (see p 136 c, and p 143 b and g, post);

(b) it was wrong to treat the boring bar in isolation and as something stationary and not dangerous, because it became a dangerous part of the machinery when in the normal working of the machine it was brought into such close juxtaposition with the rotating workpiece that a man could get his hand caught and badly damaged in the nip between the two things (see p 142 g, and p 143 d and h, post);

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Midland and Low Moor Iron and Steel Co Ltd v Cross [1964] 3 All ER 752 applied. Dicta of Lynskey J in Hoare v M & W Grazebrook Ltd [1957] 1 All ER at 473, and of Finnemore J in Lenthall v Gimson & Co (Leicester) Ltd (24 May 1956) unreported, approved. Dictum of Ashworth J in Lewis v High Duty Alloys Ltd [1957] 1 All ER at 743, disapproved.

(ii) The plaintiff was guilty of contributory negligence because when using the squeezie he must have deliberately put his hand inside the space between the boring bar and the far side of the workpiece, taking a wholly unnecessary risk, where extreme care was required, and his share of responsibility for the accident was one-third (see p 142 h and j, p 143 f, and p 144 a, post).

Notes

For dangerous parts of machinery in a factory, see 17 Halsbury’s Laws (3rd Edn) 74–76, para 126, and for cases on the subject see 24 Digest (Repl) 1052–1055, 202–218.

For the Factories Act 1961, s 14, see 13 Halsbury’s Statutes (3rd Edn) 417.

Cases referred to in judgment

Allen v Aeroplane and Motor Aluminium Castings Ltd [1965] 3 All ER 377, [1965] 1 WLR 1244, Digest (Cont Vol B) 298, 195ab.

Bill v Fisher & Ludlow Ltd (13 November 1961) unreported.

Bullock v G John Power (Agencies) Ltd [1956] 1 All ER 498, [1956] 1 WLR 171, Digest (Cont Vol A) 586, 218a.

Close v Steel Co of Wales Ltd [1961] 2 All ER 953, [1962] AC 367, [1961] 3 WLR 319, Digest (Cont Vol A) 587, 218d.

Eaves v Morris Motors Ltd [1961] 3 All ER 233, [1961] 2 QB 385, [1961] 3 WLR 657, Digest (Cont Vol A) 588, 218e.

Hoare v M & W Grazebrook Ltd [1957] 1 All ER 470, [1957] 1 WLR 638, Digest (Cont Vol A) 587, 218b.

Kilgollan v William Cooke & Co Ltd [1956] 2 All ER 294, [1956] 1 WLR 527, Digest (Cont Vol A) 585, 201a.

Lenthall v Gimson & Co (Leicester) Ltd (24 May 1956) unreported.

Lewis v High Duty Alloys Ltd [1957] 1 All ER 740, [1957] 1 WLR 632, Digest (Cont Vol A) 587, 218c.

Midland and Low Moor Iron and Steel Co Ltd v Cross [1964] 3 All ER 752, [1965] AC 343, [1964] 3 WLR 1180; affg [1964] 2 All ER 157, [1965] AC 343, [1964] 2 WLR 1365, Digest (Cont Vol B) 299, 218fa.

Millard v Serck Tubes Ltd [1969] 1 All ER 598, [1969] 1 WLR 211.

Nicholls v Austin (Leyton) Ltd [1946] 2 All ER 92, [1946] AC 493, 115 LJKB 329, 90 Sol Jo 628, 24 Digest (Repl) 1091, 419.

Walker v Bletchley Flettons Ltd [1937] 1 All ER 170, 24 Digest (Repl) 1054, 212.

Appeal

The plaintiff appealed against an order of Lyell J made on 19 December 1968 ordering that judgment be entered for F E Callow (Engineers) Ltd, the defendants, in the action by James Johnson against them on the following grounds: (i) the judge was wrong in law and in fact in failing to find that the revolving stainless steel valve body in juxtaposition with the tool of the machine operated by the plaintiff constituted a dangerous part of machinery; (ii) the judge was wrong in law in failing to find that the defendants were in breach of s 14(1) of the Factories Act 1961; and (iii) the judge erred in law and found on the facts against the weight of the evidence in holding that the use of a ‘squeezie’ on the machine on which the plaintiff was working was not a foreseeable cause of injury to anybody acting in a way in which a human being might be reasonably expected to act in circumstances which might be reasonably expected to occur.

F P R Hinchliffe QC and B A Hytner for the plaintiff.

A M Maguire QC and R R Leech for the defendants.

Page 131 of [1970] 1 All ER 129

24 October 1969. The following judgments were delivered.

FENTON ATKINSON LJ. This is an appeal against a judgment given by Lyell J at Manchester Assizes in December 1968 whereby he dismissed the claim by the plaintiff, Mr James Johnson, against his employers for damages for personal injuries. On 11 June 1964, the plaintiff, in the course of his employment as a centre lathe turner at the defendants’ factory at Skelmersdale, suffered a very serious injury to his right hand. In fact, the middle, ring and little fingers of that hand got so badly mangled that they had to be amputated. There was also some damage to his index finger. The parties are agreed that if he were entitled to succeed in full the appropriate figure for damages would be £6,000.

The plaintiff was working on a machine known as a Ward 10 lathe, and his job at the time of the accident was machining on that lathe the interior of a stainless steel valve body, which I will hereafter call the workpiece. In some way or other his right hand got trapped between the inside of the workpiece and the boring bar of the machine; and his case, and in this court his only surviving case, is that the cause of his accident was his employers’ (the defendants’) breach of their statutory duty under s 14(1) of the Factories Act 1961, which provides:

‘Every dangerous part of any machinery, other than prime movers and transmission machinery, shall be securely fenced unless it is in such a position or of such construction as to be as safe to every person employed or working on the premises as it would be if securely fenced.’

It is necessary at the outset to describe in some detail the nature of the job on which the plaintiff was engaged and the layout of the machine. Looking at a photograph in the agreed bundle of photographs, the plaintiff at the material time was standing on the duckboard one sees in the foreground of the photograph facing and immediately opposite the left hand of those two vertical wheels which one sees very clearly in the photograph. On that photograph, if one moves upwards approximately one inch and very slightly to the left, one sees a horizontal bar. One turns to another photograph where one sees that same bar at much closer range emerging from the tool post at the extreme right of the photograph. That is known, or was referred to throughout the case, as the boring bar; and one can see inserted in its left hand end a cutting tool. The relevant measurements were these, that the centre of that bar is 3 feet 9 inches above the floor level. The plaintiff was standing upright by the wheel. One can see the extreme top of the wheel towards the bottom left hand corner of that photograph. In horizontal measurement the bar would be something like 2 feet from his chest as he stood in that position. Immediately to the left of the boring bar in the second photograph is the workpiece. One can see marked on it ‘CA3222’. That in fact was a stainless steel valve body. On the right hand side of it in the photograph is the circular opening some 8 inches in diameter. The left hand side of it in the photograph is fixed to a revolving chuck, which in the course of the job causes the workpiece to revolve in an anti-clockwise direction at 30 revolutions per minute. One can see in that photograph, although not very plainly, that there are slots cut in the top and bottom of that valve body. They are said to be 8 inches long and 4 inches deep, and in the course of the case they were referred to as the apertures.

The job is done in this way, that the boring bar, remaining horizontal, is inclined to the left until the point of the cutting tool is brought in contact with the inner edge of the workpiece. The workpiece is then caused to revolve in contact with the cutting tool, and very slowly, and almost imperceptibly to the human eye, the boring bar then moves towards its left, going further and further into the workpiece, until the boring operation is completed. Counsel for the plaintiff agrees that for the purposes of this case the boring bar, because it moves so exceedingly slowly, can be treated as the equivalent of a stationary part of the machinery. According to the exact length of cutting tool the left hand end of the boring bar will come within 3/8 inch or 1/2 inch of the inner side of the revolving workpiece, whereas on the opposite side there will

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be a gap of something like 4 1/2 inches between the boring bar and the other side of the revolving workpiece.

Such a layout and mode of operation was said by the plaintiff’s expert to be common throughout the engineering industry. So far as the expert knew, nobody thought it necessary to provide a guard to prevent a man’s hand being trapped between the inner side of the revolving workpiece and the boring bar, and there was no evidence that any factory inspector had ever thought that such a guard was necessary; and the expert said that he regarded an accident in this type of job as highly unlikely. It is not suggested, and I do not think it could be suggested, that there was common law negligence by the defendants in failing to provide a guard. If there was nothing else to the case, the possibility of the operator or anybody else getting his hand trapped would appear so remote that even the strict standards of s 14(1) of the Factories Act 1961 might not require a guard.

But there is another important factor in this case. When a stainless steel workpiece is being bored it is necessary to apply a coolant to prevent the tool from overheating. This could and should be applied by means of the automatic coolant system fitted to the machine which, if operated, applies coolant to the tool in a regulated and accurately directed flow. If the plaintiff had used the coolant system he would never have had any cause to move his hand anywhere near the point where the boring bar entered the workpiece. On this occasion, he did not choose to use that system because it meant a little extra trouble or exertion. He had previously been boring cast iron workpieces, and that results in swarf collecting on the base of the machine. For cast iron workpieces no coolant is needed, but on changing to stainless steel before the coolant system can be used he and/or his labourer would, for certain technical reasons which I have not quite followed, have to clean out that swarf. On the learned judge’s finding, he regarded that as too much trouble, and so he decided to inject coolant to the desired point by using what throughout the case was called a ‘squeezie’, meaning thereby the sort of container to be found alongside most of our kitchen sinks containing, for example, liquid ‘Fairy’, or something of that sort. The plaintiff had brought his own squeezie. There was no evidence as to its exact size or shape, and nobody seems to have discovered what happened to it after the accident. He had it filled with coolant, and to save himself the trouble of having the swarf cleaned out of the machine, which he knew very well was the right thing to do, he was in the course of the job squirting coolant from his squeezie into the interior of the work-piece; and, of course, the further the job progressed the further the squeezie and his hand holding it would have to be inserted. He would have to lean forward, he would be aiming away to his left at about shoulder height, and in fact when the accident happened the boring bar had almost reached its furthest point of traverse to the left.

That was a practice, the practice of using a squeezie, which was not approved by the defendants, although undoubtedly it happened from time to time to their knowledge. Two passages in the evidence are important in this connection; and they both occur in the evidence of Mr Pobgee, who at the time of the accident had been the foreman of this particular department. Giving evidence-in-chief, he was asked by counsel for the defendants:

‘Dealing now with the squeezie bottles, who provided, if they appeared in the factory, squeezie bottles, where did they come from? A The operators themselves.

‘Q Was that practice approved of by the defendants or not? A No.

‘Q For what reason was it not approved of? A It was considered a hazard, and it was unsuitable for the working job.

‘Q If you had seen any men using one, what would you have done? A I would have stopped him and asked him the reason why.’

Then junior counsel for the plaintiff, in cross-examination, asked the witness:

‘Is this right, if you machine cast iron you don’t require a coolant? A Correct.

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‘Q And is it right if you then turn over to do a single stainless steel component you have to get the labourer to clean out the sump? A Yes, that is correct.

‘Q Would you then, after cleaning it out, top up? A Yes, the sump has to be topped up.

‘Q Would you agree that the system of using squeezies, the hand bottles, possibly grew up because of the desire of the operatives not to get their sumps cleaned out merely to do one component? A Correct.

‘Q Is this right by and large the squeezies were used as a short cut by the men to save themselves or the labourer some trouble? A Yes.

‘Q And you knew this happened? A Yes.

‘Q If the man found that the coolant system was not working because the sump required topping up, it might be a natural but lazy thing for him to do to use the squeezie rather than get the labourer to top up? A That is true.’

It is perhaps interesting to see how the matter of the use of the squeezie first got into the pleadings in this case. The statement of claim, which appeared over the signature of a very skilled and experienced pleader, instructed by solicitors whose name always suggests that they are acting for a trade union in this class of case, alleged as the first particular of negligence or breach of statutory duty that the defendants, negligently or in breach of s 14 failed to fence the trapping point, and then went on to make three allegations about the duckboard, that: they failed to provide the plaintiff with a stable duckboard; failed to clean the floor beneath the duckboard sufficiently frequently, adequately or at all; and they required the plaintiff to operate the machine when the duckboard was liable to slip. In the premises, it is alleged that they operated a dangerous system of work and provided unsafe plant. But there is not a word there about using the squeezie to inject coolant into the machine. That made its first appearance in the defence. The defence denied any negligence or breach of statutory duty, alleging contributory negligence that the plaintiff attempted to lubricate the boring tool by means of a hand bottle instead of using the soluble oil system on the said lathe. That was served on 8 February 1967. After some months, on 18 August 1967, it was alleged for the first time, by amendment to the particulars of the statement of claim, that—

‘… the soluble oil system for the said lathe being broken they failed to maintain or repair the same and/or required (by oral order from the foreman) the plaintiff to lubricate the lathe by means of a hand bottle.’

Both those allegations, introduced by amendment, on the judge’s findings, which are not now challenged, were in fact untrue; and one wonders why those allegations were made if it were not because the plaintiff realised from the very outset that he was doing a dangerous thing in using the squeezie. The duckboard, which features very prominently in the statement of claim, was abandoned by junior counsel for the plaintiff at the very beginning of the case in the course of his opening. That clearly had nothing to do with the case.

To come at long last to the actual accident, it was when the plaintiff was using or was about to use the squeezie on the first stainless steel workpiece that this accident happened. Looking once again the second photograph, the plaintiff’s evidence was that he had the squeezie ready to hand on what he called the saddle of the machine; and he marked on the photograph the point where it was. If one looks at the top of the wheel which one sees at the bottom left hand corner, on his evidence the squeezie was standing on that flat rectangular plate immediately behind the wheel, moving slightly in towards the boring bar, so that it was ready to hand almost immediately in front of where he was standing. His description of the accident is as follows. He was asked:

‘Will you now tell my Lord … what happened when you went to reach for the squeezie on the occasion of your accident? A The boring bar was partly in

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the bore of the job cutting and I reached forward for the squeezie bottle and the duckboard seemed to slip under me and as I went forward I grabbed for the boring bar and my hand must have slipped over the top of the boring bar and gone in because as it went round these fingers [he is referring there, I think, to the middle, ring and little fingers of the right hand] came round and got wedged between the boring bar and the bore and my side was pressed against the tool box.’

That was the plaintiff’s account of how the accident happened. There was no other eye-witness to the accident, at any rate no such witness was called, and the learned judge did not believe the plaintiff’s account of how the accident happened. That is not to say that he found that the plaintiff was being dishonest. Four and a half years had passed, the plaintiff had been badly hurt, and could very easily have been confused or uncertain as to exactly how the accident had happened. At any rate, the learned judge said that the plaintiff’s account of how the accident happened was not credible. On his account of the matter, it certainly seemed to be most unlikely that his hand would have gone inside the workpiece at all, or, if it did, that it would have been the middle, ring and little fingers that were caught and mangled rather than the thumb and index finger. The defendants, exploring the matter in cross-examination, suggested at one stage that maybe he had either inserted or accidentally got his hand in through one of the apertures; but at the speed at which the workpiece was rotating I agree with the plaintiff’s engineer that that would have been virtually impossible, and I do not think that the defendants seriously pursued that as an explanation of the accident.

In the result the learned judge felt quite unable to make any findings as to just how the accident happened; but he did make this finding, when he said:

‘The undisputed fact remains that the plaintiff, while the machine was working, somehow managed to get his middle, ring and little fingers of his right hand caught in the inside of the valve body and they must somehow have been drawn between the slowly revolving component and the tool bar and tool with the result that they were so mangled that they had to be amputated.’

Having made that finding, he went on to find for the defendants, putting it on his basis:

‘Other more fertile minds minds may be able to find an explanation as to how the accident probably happened but I have wholly failed to do so. If the way in which an accident occurred is so difficult of explanation, even with the benefit of hindsight, it is hard to accept that a reasonable person without that benefit should ever have foreseen it. In that state of the evidence and the suggestions put forward I find it impossible to say that the plaintiff has proved that the use of a squeezie on this machine was ” … a reasonably foreseeable cause of injury to anybody acting in a way in which a human being may be reasonably expected to act in circumstances which may be reasonably expected to occur … ”’

that being taken from Lord Guest in the House of Lords in Close v Steel Co of Wales Ltdb

It seems to me that the learned judge is there, in effect, saying this: certainly there was an accident, but there is no acceptable explanation of how this particular accident happened; therefore such an accident could not reasonably be foreseen; therefore there is no breach of s 14(1) of the Factories Act 1961 and therefore no liability on the defendants.

With all respect for the learned judge, I cannot agree with that approach in this

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case. I think that it is in fact contrary to two decisions in this court. The first decision is Allen v Aeroplane and Motor Aluminium Castings Ltd. That was an appeal to this court from a very experienced county court judge at Birmingham. The headnote reads ([1965] 1 WLR at 1244, 1245):

‘The plaintiff was a trainee machine operator employed at the defendants’ factory. The machine on which he was employed was not securely fenced, and the defendants were accordingly, in breach of section 14(1) of the Factories Act, 1961. Somehow or other the plaintiff’s fingers were caught in a dangerous nip of the machine, as a result of which he sustained minor personal injuries. On a claim by the plaintiff against the defendants for damages in respect of his injuries on the ground of breach of statutory duty, there was no evidence, apart from the plaintiff’s explanation, as to how the accident happened. The defendants by their pleading admitted that the accident happened in the course of the plaintiff’s employment. The plaintiff’s explanation of the accident was rejected by the judge as untrue, and the judge inferred from the fact that the plaintiff had given a false version of the accident that he was at the time of the accident on a frolic of his own. The judge, therefore, dismissed the plaintiff’s claim. On appeal by the plaintiff:—Held, allowing the appeal, that, since the defendants were in breach of section 14(1) of the Factories Act, 1961, and since the accident would not have occurred but for that breach, the plaintiff’s claim succeeded, even though there was no acceptable explanation of how the accident occurred, the accident admittedly occurring in the course of the plaintiff’s employment.’

Sellers LJ, having described the machine and the nip where the fingers got caught, said ([1965] 3 All ER at 378, 379, [1965] 1 WLR at 1247):

‘He [ie the plaintiff] gave an explanation which was rejected, and the matter is left without anyone being able to find on the evidence—the learned judge or this court, or even learned counsel who had to make submissions—how this accident precisely came about. That is unusual. It is often said that a plaintiff who cannot give an acceptable version of the accident which befell him or her really cannot ask the court to start to find where liability lies. This, however, is an exceptional case; it is one where the facts show clearly that there was a breach of duty, and they show equally clearly that it was because of that breach, because of the dangerous nip, that this accident occurred. In those circumstances I think that the law does not leave it open to the learned judge to come to the conclusion which he did.’

There is also a recent case in this court. That is Millard v Serck Tubes Ltd. That was a case where there was a breach of s 14. The plaintiff had got his hand caught in the dangerous part of the machine. Although the actual accident to the plaintiff happened in a way which could not have been foreseen and which was wholly unpredictable, it was held that the defendants were nonetheless liable, and it was no answer to the plaintiff for them to say that they could not possibly have foreseen the particular form of accident which actually occurred on the unguarded portion of the machine.

It seems to me in this case that three questions must be answered, the first a question of fact: applying the Walker v Bletchley Flettons Ltd test of dangerous machinery, which has later been slightly amended in the House of Lords, and paraphrasing to some extent the question of fact, in the ordinary course of human affairs could

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danger reasonably be expected from the use of the boring bar in juxtaposition with the moving workpiece, not only to the prudent, careful workman but also to the careless and inattentive workman? If the answer to that is ‘No’, that, of course, is the end of the case. If the answer is ‘Yes’, then one goes on to the question of law: on the authorities, can one say that the stationary boring bar, in juxtaposition with the moving workpiece, produced a dangerous part of the machinery which s 14(1) of the Factories Act 1961 required to be fenced? If the answer to that is ‘Yes’ then the plaintiff succeeds, subject to a third question of contributory negligence.

On the first question, I myself feel no doubt. Once the defendants are fixed with the knowledge that their employees, as a convenient short cut and to save themselves trouble, were using squeezies to squirt coolant into the inner side of workpieces of this nature they could, in my view, reasonably have foreseen that sooner or later someone might slip or overreach himself or that some careless workman might get his hand too far inside the workpiece with the danger of being trapped between the boring bar and the workpiece. Indeed, Mr Pobgee, then foreman, now assistant works manager, himself said, in the passage I have already read, that if he had seen such a thing done he would have stopped it because it was, in his view, hazardous. So, in my view, the first question must be answered in favour of the plaintiff.

That brings me to the question of law; and this is an interesting question and it was in fact expressly left open by the House of Lords in the recent case of Midland and Low Moor Iron and Steel Co Ltd v Cross. The question is this: can there be a breach of s 14(1) where the danger results from the juxtaposition of a stationary and, if considered in isolation, harmless piece of the machine with a moving workpiece? This problem had arisen in the summer assizes of 1956 three times within three months. It was considered by Finnemore J in May, by Ashworth J in June and by Lynskey J in July 1956. Finnemore J and Lynskey J answered the question ‘Yes’: Ashworth J answered the question ‘No’.

Lynskey J’s decision is reported. That is Hoare v M & W Grazebrook Ltd. I think it is necessary to read the headnote ([1957] 1 All ER at 470, 471):

‘The plaintiff was a machine operator employed by the defendants at their foundry. On Feb. 8, 1954, he was in charge of two machines, one of which was a vertical boring machine which consisted of a slotted table on which the job to be worked (which, on that day, was a steel axle-box) was clamped by means of an angle plate. The table was four feet nine inches in diameter and revolved, when it was in use, at some fourteen revolutions a minute in an anti-clockwise direction. The angle plate, which was some twenty-two inches long and fifteen inches high, was fixed towards the rim of the table and the job was attached to it by means of two arms. As the table revolved the angle plate also revolved, causing the job, or component, to rotate round a borer which moved slowly down to make a hole in the job. [That is exactly the process we are concerned with in this case, except that here it is done horizontally whereas there it was done vertically.] The borer took about an hour and a quarter to make one cut through the job, and during that time it travelled a distance of some nine inches. It was the practice (as the defendants should have known) for men to test whether borers such as this were working satisfactorily, in jobs into which they could not see, by putting a hand against the borer to see if there were any vibration. The plaintiff tested his machine in this way and while his hand was on the borer the angle plate came round and caught his elbow, and his hand slipped into the aperture which the borer had made, was caught [just like the plaintiff in this case] in the nip between the borer and the job that was being bored and was badly mangled. The plaintiff claimed damages against the defendants for

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breaches of their statutory duty under s. 14(1) of the Factories Act, 1937, on the ground that the angle iron and the borer in conjunction with the rotating job were dangerous pieces of machinery and should have been securely fenced.Held: (i) the defendants were liable … [The important finding for this purpose is] (b) the fact that, when the machine was in operation, a nip was created between the borer and the component which was being operated on made that part of the machine a “dangerous part” of the machinery, within s. 14(1), and the nip should have been fenced … ’

Turning to the judgment the learned judge referred to three cases, Bullock v G John Power (Agencies) Ltd, Nicholls v Austin (Leyton) Ltd and Kilgollan v William Cooke & Co Ltd and said ([1957] 1 All ER at 473, [1957] 1 WLR at 641, 642):

‘… the facts, in each case, were that either wood or wire, having passed through the machine, was thrown out and caused the damage. In other words, in each of those three cases the cause of the trouble was the component itself, the job and not the machine. It was submitted that those cases bound me to hold that, in effect, I must look at the machine independently from the work, the job or the component, and that, if the machine without the component in this particular part to which I am referred was not dangerous, then I could not hold that it was a dangerous part of the machine.’

Then he went on to refer to Finnemore J’s decision in Lenthall v Gimson & Co (Leicester) Ltd which had been given some two months earlier, and was unreported. He said ([1957] 1 All ER at 473, 474, [1957] 1 WLR at 642):

‘In that case there was a moving table, which carried the component under a bridge on the machine. The bridge itself, when not in use, or when there was no component being worked on in the machine, was quite safe, but what made it dangerous was the fact that, when the component was carried under the bridge, the two together created a nip, with the result that the bridge which by itself was innocuous, was rendered dangerous because of the movement of the component. [Then comes an important passage, which has been quoted with approval since.] One has to have regard to the purpose of the Factories Act, 1937, and that purpose is to protect operatives from danger. If the danger does exist from the operation of the machine … it seems to me that that is a “dangerous part” of the machinery, and the fact that it is not dangerous when no operation is taking place is quite irrelevant. What the Act of 1937 requires me to consider is whether, in fact, when the machine is in operation and being worked as it was designed to work, the part becomes a dangerous part of the machinery as a result of the operation; in other words, not whether the component is dangerous in itself, but whether the machine becomes dangerous as a result of the operation.’

Lynskey J went on to quote ([1957] 1 All ER at 474, [1957] 1 WLR at 642, 643) the passage from Finnemore J’s judgment in Lenthall v Gimson & Co. Finnemore J had said:

‘When you have got a case of this sort where there are a moving table and a pillar or column and the work which is put on to the table creates what has been called a nip, a place where a man can be caught, then that would be a danger in the machine itself and not merely a danger from the workpiece with which the machine is dealing at the time.’

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Lynskey J said that he entirely agreed with that. He said ([1957] 1 All ER at 474, [1957] 1 WLR at 643):

‘The previous decisions do not deal with this point, namely, whether a machine becomes dangerous in the operation which it is intended to perform, by reason of the component part creating a nip with a part of the machine which it is designed to come very close to … the Act is intended to apply, not merely to moving parts of the machinery, but no non-moving parts of machinery if they are dangerous or become dangerous in use. I think that that is this case.’

Ashworth J’s decision, Lewis v High Duty Alloys Ltd was given some six weeks before the case to which I have referred but Ashworth J had before him Finnemore J’s unreported decision. The material part of the headnote is to the effect that the plaintiff slipped while oiling an automatic planing machine while it was in motion, and his left arm was crushed between a metal block which was being planed and a V-shaped slide, which was part of the machine. The V-shaped slide was not dangerous in itself. On a claim by the plaintiff against the defendants for damages for breach of their statutory duty under s 14(1) for the failure to fence, it was held ([1957] 1 All ER at 740) that there was no breach of s 14(1)—

‘… since the danger was constituted by the conjunction of the V-shaped slide and the metal block and the obligation to fence dangerous parts of machinery imposed by s. 14(1) did not apply where the danger arose indirectly through the conjunction of part of the machine with some part of the materials used on it.’

In fact, the learned judge’s views on that matter were, strictly speaking, obiter, because he was in any event finding in favour of the plaintiff on the ground of breach of common law duty of care; but the quoted ([1957] 1 All ER at 743, [1957] 1 WLR at 636) first of all certain passages from the speeches of Lord Simonds and Lord Uthwatt in Nicholls v Austin, which was a case of wood being worked on a machine, and a sliver of the wood flying off and injuring the plaintiff—quite a different class of case from this. He referred to very much the same passages that counsel for the defendants read to us yesterday.

He goes on to refer to other cases where the same sort of issues had arisen. He referred to Kilgollan v Cooke and said ([1957] 1 All ER at 743, [1957] 1 WLR at 636, 637):

‘Although I am conscious that the distinction between the present case and that decided by FINNEMORE, J., may be so fine as to be non-existent, I am of opinion that the circumstances of the present case do not disclose any breach of the Factories Act, 1937, by the defendants. The part of the machine about which complaint is made is the V-slide, and that I do not regard as a dangerous part of the machine taken by itself. What constituted the danger was the conjunction of the V-slide with a die. The die is not part of the machine; it is material which is being worked by the machine. It may be that although sub-s. (1) covers parts of the machine, and the paragraph at the end of s. 14 [that is a reference to s 14(3)] covers articles or materials, there is a statutory gap and that no statutory obligation is imposed on factory owners where the danger arises indirectly through the conjunction of part of the machine with some part of the materials.’

He did not there draw any distinction between the case of the stationary machine and the moving component and vice versa. His language would be wide enough to cover both cases and to say that in neither case would there be any breach. As will

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be seen, the language of that, at any rate, is contrary to the view which the House of Lords took in Cross’s case.

I turn next to that case, which was in form a prosecution on an information by the factory inspector for an alleged breach of s 14(1) of the Factories Act 1961 and the magistrates had acquitted the defendants. The facts are, shortly, these: the charge was that the defendants ([1965] AC at 343, 344)—

‘… being the occupiers of a factory, contravened section 14(1) of the Act in that a certain dangerous part of machinery, namely, the top and bottom leading-in rollers of a roller bar-straightening machine, in the use of the factory was not securely fenced. The machine consisted of eight rollers positioned in two banks of four, the lower bank alone being power driven. The top bank was not vertically above the lower bank, and when a bar was inserted the bottom power-driven rollers would cause the hitherto stationary top rollers to revolve in the opposite direction. An employee of the defendants was operating the machine when, in feeding in a bar, his hand was nipped between the bar and the top rollers. The justices dismissed the information, finding that there was no duty to fence against the danger created by the juxtaposition of a moving piece of material and a part of the machine not in itself dangerous:—Held, that in considering whether a part of machinery was “dangerous” within the meaning of section 14(1) one must have regard to the operation of that part while the machine was doing its ordinary work. Although the top rollers were not in themselves dangerous, in the sense that there was no danger from them when the machine was doing no work, there was danger to a workman operating the machine in the normal way. The accident was reasonably foreseeable and the case must be remitted to the justices with a direction to convict.’

The House of Lords upheld the decision of the Divisional Court ([1964] 2 All ER 157, [1965] AC 343).

It is perhaps useful to start by looking at the judgment of Lord Parker CJ in the Divisional Court. He dealt ([1964] 2 All ER at 160, [1965] AC at 350) first with Finnemore J’s decision in Lenthall v Gimson; he went on ([1964] 2 All ER at 161, [1965] AC at 351) to refer to Lewis v High Duty Alloys Ltd, Ashworth J’s case; and then ([1964] 2 All ER at 161, [1965] AC at 351) he referred to Hoare v Grazebrook, saying ([1964] 2 All ER at 161, [1965] AC at 351):

‘For my part, I attach very considerable importance to this case and to the decision of LYNSKEY, J. There, quite shortly, the operator was working a vertical boring machine; the boring machine did not itself bore but the job was attached to a table and revolved under the stationary tool. A time came when the operator got his hand inside the bore and nipped between the revolving table and the stationary tool.’

Then he referred to Lynskey J, going through Nicholls v Austin and Bullock v G John Power, and he referred to Finnemore J’s decision. He then read ([1964] 2 All ER at 161, [1965] AC at 352) the passage which I have already read ([1957] 1 All ER at 474, [1957] 1 WLR at 642):

‘What the Act of 1937 requires me to consider is whether, in fact, when the machine is in operation and being worked as it was designed to work, the part becomes a dangerous part of the machinery as a result of the operation; in other words, not whether the component is dangerous in itself, but whether the machine becomes dangerous as a result of the operation.’

Lord Parker CJ then went on ([1964] 2 All ER at 161, [1965] AC at 352):

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‘If I might add one other ingredient to what is there laid down by LYNSKEY, J., I would emphasise that one must look at the normal or ordinary operation of the machine, ignoring matters such as happened in Eaves v. Morris Motors, Ltd., the case of what is referred to as the uncovenanted stroke.’

He then went on to deal with Eaves v Morris Motors. That was a case where the machine had quite unexpectedly executed what counsel for the defendant described ([1961] 2 QB at 388) as an ‘uncovenanted stroke’ and as a result, in withdrawing his hand, the workman had cut his fingers on some part of the workpiece which was in the machine.

The importance of the case for this purpose is that Holroyd Pearce LJ (although it was for the purpose of that case obiter) said ([1961] 3 All ER at 238, [1961] 2 QB at 395, 396):

‘Although Bullock v. Power [that was a case of some wire being worked on a machine and wire from the workpiece flying out and injuring the workman] does not allow us to equate dangers from the nature of the material (i.e., the sharp edge of the bolts) to dangers from the machinery, it does not compel us when deciding whether machinery is dangerous to disregard the nature of the machine when it is doing its normal appointed task or from holding it to be dangerous if that task clearly involves danger from its juxtaposition with its normal materials. If a moving arm of the machine does not project, and is, therefore, safe when the machine is empty, but projects dangerously when the machine is supplied with its proper material, it can obviously be labelled as dangerous machinery. And if it creates a dangerous nip when supplied with its normal material and when working normally (or in a foreseeable manner) I see no reason in principle why the court cannot consider the machinery dangerous, even if that nip is only created by the juxtaposition of material and machinery. For in that case [and these seem to me to be the vital words] it is not the nature of the material and it is not the material itself which causes the danger. The danger is caused by the design of the machine itself working normally with harmless material. Therefore, if the block in the present case when armed with the bolts for which it was intended and when working normally (or in a foreseeable manner), created a nip between the bolts and the guard which might take the operator unawares, we could in my view hold that this machine was dangerous.’

Then Lord Parker CJ went on to say ([1964] 2 All ER at 162, [1965] AC at 353) that Willmer LJ, who was sitting in that case, did not deal with this point, but he did refer with approval to a passage in Lynskey J’s judgment in Hoare v Grazebrook, although he did not, apparently, agree with the decision; but in fact he appears to have agreed with Lynskey J on the vital point, because, looking at the report of the judgment in Eaves v Morris Motors ([1961] 3 All ER at 240, [1961] 2 QB at 398), Willmer LJ dealing with the unexpected motion of the machine, referred to Hoare v Grazebrook and said that he did not agree with the decision, but he said that in his view Lynskey J stated the question correctly when he said ([1957] 1 All RE at 474, [1957] 1 WLR at 643), ‘that it was “whether a machine becomes dangerous in the operation which it is intended to perform”,’ which seems very much to the point in this case.

Lord Parker CJ in his judgment in Cross’s case ([1964] 3 All ER at 762, [1965] AC at 353) then went on to refer to an unreported case in this court, Bill v Fisher & Ludlow Ltd where Holroyd Pearce LJ

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again referred to Hoare v Grazebrook with complete agreement. In that case, Willmer LJ regarded the question we are considering in this case as apparently being completely open. One sees from the report ([1964] 2 All ER at 163, [1965] AC at 354) that counsel for the defendants before the Divisional Court was arguing that, in deciding whether a part of a machine is dangerous, one must look at the physical part itself in isolation, quite apart from everything else. He said that one is not entitled to consider the process in which what is otherwise a safe part of the machine becomes dangerous by conjunction with material, and he went on to cite Nicholls v Austin in particular. It seems to me that his argument, which was rejected by the Divisional Court there and later also in the House of Lords ([1964] 3 All ER 752, [1965] AC 343), was almost exactly the argument which counsel for the defendants was putting before us.

Lord Parker CJ went on to quote certain passages from Nicholls v Austin, which, as already stated, was a case of something from the workpiece flying out and hitting the workman. He reads passages from Lord Simonds and Lord Uthwatt, and he said ([1964] 2 All ER at 163, 164, [1965] AC at 355):

‘… those are very wide words, but they must be related to the facts of the case under consideration. As I have already said, what was being considered in Nicholls v. Austin (Leyton) Ltd. was whether there was any duty to fence a machine so as to prevent part of the material in question being thrown up and injuring the workman … ’

Later Lord Parker CJ said ([1964] 2 All ER at 164, [1965] AC at 356):

‘Having been through all these cases, I return to the judgment of LYNSKEY, J. I think that that was right, and, for my part, I am content to put it in the way in which he put it in the passage to which I have referred.’

Widgery and John Stephenson JJ agreed.

The matter then went to the House of Lords ([1964] 3 All ER 752, [1965] AC 343), where all their Lordships upheld the decision of the Divisional Court. Looking first of all at the speech of Lord Evershed, where he said ([1964] 3 All ER at 757, [1965] AC at 368):

‘I, therefore, find myself in entire agreement with LORD PARKER. C.J., WIDGERY, J., and JOHN STEPHENSON, J. Like the Lord Chief Justice, I adopt and affirm the language of LYNSKEY, J., in the case closely parallel to the present of Hoare v. M. & W. Grazebrook, Ltd., and adopt the language quoted by LORD PARKER, C.J. … ’

Then he read again the passage from Hoare v Grazebrook ([1957] 1 All ER at 474, [1957] 1 WLR at 643). He went on to read the passage which I have already read from Holroyd Pearce LJ’s judgment in Eaves v Morris Motors Ltd ([1961] 3 All ER at 238, [1961] 2 QB at 395). He set that out ([1964] 3 All ER at 757, [1965] AC at 369), and referred to it with entire approval and said that he adopted those obiter dicta.

There are, I think, interesting passages to be found in the speeches of Lord Morris of Borth-y-Gest and Lord Hodson, highly relevant to the present case. For example, Lord Morris (I will not read the whole judgment) said ([1964] 3 All ER at 759, [1965] AC at 372):

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‘What has to be considered in this case is whether there was a part which was dangerous for the reason that it would be a source of danger when the machine was either in motion or in use. If use involves a juxtaposition between material and the machine so that a dangerous nip is created when the machine is supplied with its normal material and is working normally or in a foreseeable manner, then, as HOLROYD PEARCE, L.J., said in Eaves v. Morris Motors Ltd ([1961] 3 All ER at 238, [1961] 2 QB at 395): “it is not the nature of the material and it is not the material itself which causes the danger. The danger is caused by the design of the machine itself working normally with harmless material.” In my judgment, it was apparent that the rollers of the machine now in question were a source of danger to anyone who was required to put the machine to its normal and contemplated use.’

Lord Hodson also quoted that same passage from Holroyd Pearce LJ with approval, but he posed the question in this way ([1964] 3 All ER at 760, [1965] AC at 373):

‘The question has been put in this way. “Is a part of machinery not dangerous in itself a ‘dangerous part’ within the meaning of the section because of the juxtaposition of material introduced into the machine in the normal course of its operation?” My lords, I have no doubt that the answer must be that given by the Divisional Court.’

It is quite true that in that case their Lordships were dealing with a part of the machinery normally quite safe and only put into motion by the introduction of material into it, that material being in itself harmless. They specifically left open the question of whether there could be a breach of s 14 when the danger results from a stationary part of the machine in contact with moving material being worked in the machine. In my judgment, if a machine is being worked in its normal way with its normal material and the result is a dangerous nip between a bit of the machine and the material, then it should make no difference in principle whether the bit of the machine is moving and the material is stationary or whether it is the other way about. Like Lord Parker CJ, I find myself coming back to the words of Lynskey J in Hoare v Grazebrook, which I will not read again.

In my judgment it is quite wrong in this case to consider the boring bar in isolation and say that by itself it is stationary and there is nothing dangerous about it. I think it became a dangerous part of the machinery when in the normal working of the machine it was brought into such close juxtaposition with the rotating valve body that a man could get his hand caught and badly damaged in the nip between the two things. In my judgment, there was here a breach of their statutory duty under s 14(1) of the Factories Act 1961 by the defendants.

There remains the question of contributory negligence. It seems to me that the necessary inference from the evidence, including the actual nature of the injury to his hand, is that the plaintiff, instead of using the coolant system, was saving himself trouble by using a squeezie. I think that to get trapped as he did he must have quite deliberately put his hand inside the space between the boring bar and the far side of the workpiece. I think that in doing that he was first of all taking a wholly unnecessary risk and, having taken that risk, he cannot thereafter have been taking reasonable care for his own safety in carrying out the squeezing operation, which obviously required extreme care, particularly at the stage when the boring bar reached the far end of its traverse, as it had here. In my view, there is no escape from the conclusion that he was guilty of contributory negligence and that he must bear a share of the responsibility for this action. In my judgment his share should be one-third. As a result, I would hold the defendants two-thirds to blame for this

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accident, and that would mean that I would allow the appeal and give judgment for the plaintiff for £4,000.

KARMINSKI LJ. I agree, and desire to add a very few words of my own, chiefly because we are disagreeing with the view expressed by Lyell J below. Section 14 of the Factories Act 1961, to which Fenton Atkinson LJ has referred in detail, imposes a duty on the defendants in excess of their common law duty in a case of this kind. On the facts of the case it seems to me clear that the machine was doing its normal appointed task. If I may borrow from a portion of the speech of Lord Morris of Borth-y-Gest to which Fenton Atkinson LJ has already referred in Midland and Low Moor Iron and Steel Co Ltd v Cross ([1964] 3 All ER 752 at 759, [1965] AC 343 at 372) what has to be considered here is whether there was a part which was dangerous for the reason that it would be a source of danger when the machine was either in motion or in use, because it involves a juxtaposition between material and machine so that a dangerous nip is created when the machine is supplied with its normal material and is working normally or in a foreseeable manner.

As I understand the facts in this case, there was a juxtaposition between the material and the machine, a nip was created and the machine was working normally. I am quite unable to appreciate any difference of importance which has to be considered in a case of this kind on the question of whether it was the bar itself which was moving of the component which was, as in this case, rotating. It seems vital to look at the machine as a whole, one part rotating and the other part staying still. Once that is accepted, it appears to me clear that there was a breach by the defendants of their obligation imposed on them under s 14. It is desirable that I should state my complete agreement with what Fenton Atkinson LJ has said about the judgments of Lynskey J in Hoare v M & W Grazebrook Ltd and of Finnemore J in Lenthall v Gimson & Co (Leicester) Ltd. In my view both were correct, and it follows that I must express my disagreement with the judgment of Ashworth J in Lewis v High Duty Alloys Ltd.

So far as the issue of contributory negligence is concerned, I have no doubt at all that the plaintiff here contributed to his own very severe misfortune, and I agree also that the correct apportionment is that he is one-third to blame. I also would allow this appeal.

SIR GORDON WILLMER. I agree with both the judgments which have been delivered. I should have been content to say no more, were it not for the fact that reference has been made to the view which I expressed in Eaves v Morris Motors Ltd ([1961] 3 All ER 233 at 240, [1961] 2 QB 385 at 398) when I ventured to say, quite obiter, that I thought that the decision of Lynskey J in Hoare v M & W Grazebrook Ltd was a wrong decision. As has been pointed out, I did later retract that observation in a subsequent casec, when I said that I was content to leave that question open. Having now had the benefit of hearing the question fully argued, I am, like my Lords, satisfied that the juxtaposition of a stationary part of machinery with a moving workpiece may render the relevant part of the machinery dangerous within s 14 of the Factories Act 1961. I feel no doubt that in this case it did so. I therefore agree that the judgment of the learned judge below cannot stand, and that the defendants are under a liability to the plaintiff.

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I also agree that the plaintiff must bear some share of his own damage because of his own contributory negligence. I agree with the apportionment of blame suggested by my Lords.

Appeal allowed. Leave to appeal to the House of Lords granted.

Solicitors: Evill & Coleman (for the plaintiff); Norton, Rose, Botterell & Roche, agents for Weightman, Pedder & Co, Liverpool (for the defendants).

F A Amies Esq   Barrister.

Levine and another v Morris and another

[1970] 1 All ER 144

Categories:        TORTS; Negligence; TRANSPORT; Road        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        RUSSELL, SACHS AND WIDGERY LJJ        

Hearing Date(s):        6, 7, 8, 9 OCTOBER 1969        

Highway – Negligence – Traffic sign – Siting – Duty of Ministry – Duty towards negligent drivers – Sign 4 feet from edge of carriageway – Site at end of bend – Safer and equally good site further away – Duty to select safer site – Regard for foreseeable hazards – Car negligently driven in heavy rain – Skid and striking of kerb – Collision with sign opposite.

The southbound 24 foot carriageway of the dual carriageway A452 road had a down gradient of 1 in 19 and a slight right hand bend before crossing Hollywell Brook where alone it was bordered by kerbs and then went up a rise towards Stonebridge roundabout. The right hand bend was sharp from a road construction point of view according to a Ministry of Transport engineer and substandard for such a road according to a Ministry Memorandum on Road Design 1961 (no 780) suggesting minimum requirements for a 70 mph road design for such a road instead of the 60 mph road design applied. A large road sign with massive concrete columns had been erected by the Ministry in 1965 4 feet from the nearside edge of the carriageway at the end of the bend and towards the rise. The siting of the sign was criticised as being likely to be struck by a vehicle leaving the bend tangentially by the Ministry divisional engineer in a letter to the county engineer of May 1966 and as leaving ‘very much to be desired on road safety grounds’ in a letter of the county surveyor of August 1966. It was subsequently moved to a safer position. While being driven along the carriageway in April 1966 at 50 mph in heavy rain, a car skidded, went out of control, hit the offside kerb, shot back across the carriageway and 100 feet later after leaving the carriageway crashed into the concrete columns of the sign. One passenger was killed and another injured. The trial judge found the driver negligent in driving and the Ministry negligent in the siting of the sign as ‘foreseeably likely to give rise to unnecessary and grave hazards to users of the carriageway’, and further that on the evidence there had never been any ‘proper appreciation by a properly qualified person of the alternative hazards presented by alternative sites for this sign’. He apportioned liability for the accident as to 75 per cent to the driver and to 25 per cent to the Ministry. On appeal,

Held – The judgment of the trial judge would be affirmed, because—

(i) when siting massive signs for roads the Ministry of Transport owed a duty to motorists, where there were two sites equally good as regards visibility, not to select the one that involved materially greater hazards to motorists including both motorists going off the carriageway inadvertently through no fault of their own (burst tyres, etc) and motorists involved in accidents due to that category of negligence which ‘experience and common sense teach’ was likely to occur (dictum of Lord du Parcq in London Passenger Transport Board v Upson [1949] 1 All ER at 72, applied); although

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the need for special siting to avoid undue risks only arose where the configuration of the road made it foreseeable that there was an above-average risk of serious accident (see p 148 f and g, p 148 j, to p 149 a, p 150 j, to p 151 a, and p 152 f and g, post);

(ii) a massive sign only 4 feet off the carriageway clearly constituted a hazard by exposing to materially greater danger of injury any motorist inadvertently leaving the carriageway and travelling towards it and on the evidence an accident of the type involved was almost inevitable and could be disastrous; such danger could easily have been greatly diminished by siting the sign at an equally visible position further from the bend, and the judge was right in holding that a proper appreciation by a properly qualified person would have shown that the siting was foreseeably likely to give rise to such hazard and that no such appreciation had ever been made (see p 149 b, p 149 h, to p 150 a, p 151 c, and p 152 h, post);

(iii) the accident was of a type which would be expected in bad weather on the substandard road, notwithstanding that the car did not leave the carriageway tangentially and it arose from a skid (see p 150 d, p 152 b and c, and p 152 j to p 153 a, post).

Notes

For the power of highway authorities to erect traffic signs see 19 Halsbury’s Laws (3rd Edn) 230, 231, para 370, and for cases on the subject, see 26 Digest (Repl) 530–534, 2062–2091.

Cases referred to in judgments

British Fame (Owners) v Macgregor (Owners) [1943] 1 All ER 33, [1943] AC 197, 112 LJP 6, 168 LT 193, 17 Digest (Repl) 194, 917.

London Passenger Transport Board v Upson [1949] 1 All ER 60, [1949] AC 155, [1949] LJR 238, 45 Digest (Repl) 21, 58.

Thorogood v Van Den Berghs and Jurgens Ltd [1951] 1 All ER 682, [1951] 2 KB 537, 115 JP 237, 24 Digest (Repl) 1023, 13.

Appeal and cross-appeal

The second defendants, the Ministry of Transport, appealed against a judgment of Cumming-Bruce J given on the trial of consolidated actions at Birmingham Assizes on 9 December 1968, adjudging that the first defendant, Alan David Morris, the driver of a car, and the Ministry should pay to the plaintiffs £784 13s in the first action and £1,334 in the second action and that as between the defendants the driver should bear three-quarters of the liability and the Ministry one-quarter. The grounds of appeal were as follows: (i) the judge was wrong in law in holding that the Ministry were under a duty in siting the road sign with which the driver collided to have regard to drivers including the present driver who drove negligently and who negligently failed to have due regard to the weather conditions then prevailing. (ii) The judge misdirected himself in holding that the Ministry were negligent in siting the sign in the position in which it was at the time of the accident and alternatively the judge’s finding that the Ministry were negligent in siting the sign was against the weight of evidence. (iii) The judge in holding that the Ministry were negligent in so siting the sign: (a) failed to have due regard to the fact that the recommendations laid down in the Ministry’s booklet entitled ‘Informatory Signs for Use on All Purpose Roads’ had been complied with; (b) failed to have due regard to the evidence given on behalf of the Ministry as to the siting and position of the sign; and (c) wrongly held that there was no evidence that those concerned on behalf of the Ministry with the siting and the position of the sign made any appreciation of the safety factors involved in its siting and position. (iv) The judge misdirected himself in holding that the sign was likely to give rise, and that the Ministry ought to have foreseen that it was likely to give rise, to an unnecessary and grave hazard to users of the road; and alternatively such finding was against the weight of the evidence. (v) The judge misdirected himself in holding that the Ministry ought to have foreseen that the sign was likely to

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constitute an unnecessary danger to the driver, who as the judge found negligently so drove his motor car as to cause or permit it to skid to his offside, strike the offside kerb and thereafter to go out of control and strike the sign; and alternatively such finding was against the weight of the evidence. (vi) On the evidence the judge ought to have found that any negligence on the part of the Ministry was not a cause of the accident. (vii) On the evidence the judge ought to have found that the accident was caused solely by the negligence of the driver.

The driver cross-appealed on the ground that the apportionment should have been 50:50 instead of the three-quarters and one-quarter determined by the judge.

D A Barker QC and M A B Burke-Gaffney for the Ministry of Transport.

Tudor Evans QC and I J Black for the driver.

9 October 1969. The following judgments were delivered.

SACHS LJ delivered the first judgment at the invitation of Russell LJ. These cross-appeals are against a judgment of Cumming-Bruce J at Warwick Assizes on 9 December 1968 in consolidated actions brought against the two defendants by the administrators of the estate of Emmanuel Stewart Levine deceased and by Mrs Levine, his mother, respectively. The deceased, aged 20, and his mother were passengers in a Vauxhall car which on 5 April 1966 was being driven southwards by the first defendant (to whom I will refer as ‘the driver’) at a considerable speed in heavy rain along a dual carriageway, the A452, towards Stonebridge roundabout. The car skidded, went out of control, hit the offside kerb and then shot back across the 24 feet carriageway and some 100 feet later, having gone off that carriageway, crashed into the massive concrete columns which support a great road sign erected by the second defendants (to whom I will refer as ‘the Ministry’) 4 feet from the nearside edge of that carriageway. Mr Emmanuel Levine was killed and Mrs Levine was injured.

The learned trial judge, having found that both defendants were liable in negligence, for reasons to which reference will be made in due course, apportioned the blame as at 75 per cent against the driver, who was found to have driven without due skill, and at 25 per cent against the Ministry, who were found negligent in the siting of the sign. The Ministry appeal on liability. The driver in this court does not dispute liability, but cross-appeals on the apportionment and contends that it should have been 50:50. In those circumstances, the plaintiffs are not represented in this court.

The material part of the southbound carriageway of the A452 has a down gradient of 1 in 19. There is then a slight right hand bend and it crosses Hollywell Brook, where alone it is bordered by kerbs, and it then goes up to a rise leading towards the roundabout. Just about at the end of the bend and towards the rise there was situated this large sign. The accident occurred after the driver had quite properly passed a lorry, was returning to his nearside lane, and was straightening up a little before coming to the bridge that crosses Hollywell Brook.

The case against the driver was that he negligently got into a skid when driving at about 50 mph in heavy rain, through returning to the nearside lane and straightening out in the way that he did. I pause to emphasise a point of some importance. When one looks at the photographs and at the plan the bend appears very slight, and certainly not one that would strike an average driver as a bend dangerous to take at speed. Indeed, at one part of his judgment the learned trial judge said this:

‘In December, 1965 this stretch of road was still apparently innocent to the layman, innocent of any propensity to cause loss of control … ’

The difficulty requiring skilful judgment occurred where the road had unfortunately been constructed to pre-1961 standards and had a design speed lower than that which would have obtained had it been constructed two or three years later.

It is in those circumstances that the judgment touching the liability of the driver reads:

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‘… I hold that it is an inescapable inference that [the driver] failed to attain the degree of skill and care which the law requires.’

This appears to refer back to what the judge said earlier when he referred—

‘… to the inference that the plaintiff’s skid was because at the speed which he had elected to go he misjudged the degree of correction necessary as a result of his manoeuvre in trying to return gradually to the nearside and then negotiate the right hand bend ahead of him.’

(It is to be noted that the speed of the driver was found to be in the 50 mph area and was thus not in itself an excessive speed, as 70 mph was said by one of the Ministry witnesses to be the speed that other cars were going in that rain, and moreover the speed at which he himself was wont to go at times in rain.) Moreover, later in the judgment one finds this further passage:

‘… it is only because unfortunately [the driver] was not sufficiently skilful at the relevant point that he created the situation in which the vehicle that he was driving, trying to control, left the carriageway altogether.’

As I interpret those passages, in the light of the evidence on the question of road design and conditions (as to which more will have to be said later), the driver’s error was only marginally on the wrong side of the border-line between error of judgment and negligence. There is no suggestion that he was driving negligently; indeed, his mistake was of a type which motorists are prone to make unless they are very experienced; and, moreover, the accident was one which might well not have occurred on that road had it had an up-to-date design.

Turning now to the case against the Ministry, the driver raised two main contentions: first that his loss of control was due to negligence in the design of the road; and secondly that the damage flowing from the skid was greatly increased owing to the negligence of the Ministry in siting that massive sign there. These allegations fell to be assessed in the light of the sequence of events relating to the construction of the dual carriageway and the erection of the sign. The design scheme for the carriageway was formulated in 1959. The final plans were approved in March 1961. Then in June 1961 there was issued a Memorandum on Road Design (no 780), the recommendations in which were not incorporated in the scheme for construction. The contracts were placed in 1962, and the work on the scheme commenced in December 1962. The dual carriageway was opened in June 1964. The relevant sign was erected in December 1965, under the powers given to the Ministry by s 52 of the Road Traffic Act 1960 (now superseded by a parallel section).

As regards road design, the plaintiffs and the driver alleged a number of faults. The most important was that the design speed should have been 70 mph, as recommended for such roads in memorandum no 780, and not 60 mph, which was in fact the design speed adopted for the scheme. On the basis of that contention the bend should have had a greater radius and the banking should have been more pronounced and efficient. There are also allegations, not stemming from the contents of memorandum no 780, against the nature of the surface and against the drainage.

In support of their case against the Ministry the plaintiffs relied on a number of matters. They relied on the fact of three other accidents having occurred on this short stretch—one of which was fatal but took place after 5 April 1966; on the fact that other motorists gave evidence as to a degree of tail wobble, one saying that he had had it himself at 40 mph and that he had seen others have it at 50 mph; on the evidence of design specialists; and on correspondence between the district surveyor and the county surveyor in 1966 which strongly criticised the siting of the sign, and to which further reference will be made. They relied also on the alterations made after the accident to the line of the road and the banking; and as regards the sign they relied on the fact that in consequence of the correspondence to which I have referred it was moved nearer to the Stonebridge roundabout to an equally visible position.

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The first branch of the case against the Ministry, that relating to negligence in road design, was rejected in the main, because, while the design did not conform to the standards published in June 1961, the learned trial judge held:

‘I accept that it was unreasonable to hold up the works in order to adjust the design to the standard recommended by memorandum 780.’

The fact remains, however, that it was common ground that, although the carriageway conformed to the minimum standard (as opposed to the desirable standard) for a 60 mph road design, it was substandard in relation to the minimum requirements of the 70 mph road design set out in memorandum no 780. Thus, when turning to the second contention of the plaintiffs, on which the trial judge found against the Ministry, it is important at the outset to note that by December 1965, when this sign was erected, the authorities had had ample opportunity to digest memorandum no 780 and to appreciate the risks involved through the design of this particular stretch falling below the 70 mph standard.

The first issue for consideration as regards the siting of the sign is this: were the Ministry when selecting a site under any duty vis-a-vis any of the motorists who might shoot off the carriageway to take reasonable care not to impose unnecessary hazards to their safety. This was a hotly contested issue before the learned trial judge and again in this court. It was contended that the Ministry were under no duty at all to any such motorists. It was asserted that the Ministry had an absolute and paramount duty to erect a clearly visible sign, and that so long as this duty was complied with they had no duty at all to consider hazards to any such motorists, not even if there existed two potential positions for the sign where the visibility was equal, but one obviously involved materially more such hazards than the other.

Any such proposition in relation to the Ministry’s action under the powers given by s 52 of the Road Traffic Act 1960 is quite untenable. It is well known that on high speed roads there is a risk of motorists going off the carriageway inadvertently through no fault of their own, especially in bad weather. There are many potential causes of such inadvertent happenings, such as, for example, tyres that burst or, unknown to the driver, are out of balance; indeed, one could frame a long list of causes which carry no blame on the driver. In addition, there are cases in which the accidents are due to that category of negligence which, to adopt the words of Lord du Parcq in London Passenger Transport Board v Upson ([1949] 1 All ER 60 at 72, [1949] AC 155 at 176): ‘experience and common sense teach’ is likely to occur. The chances of such accidents happening ought always to be borne in mind by the Ministry, and the extent of those chances should be assessed.

The Ministry owe to motorists at least a duty when siting massive signs to take reasonable care when there are two sites equally good as regards visibility not to select the one that involves materially greater hazards to the motorist. Thus, it would be clearly unjustifiable for the Ministry unnecessarily to elect to erect on the verge by a traffic accident black spot a massive piece of what is termed ‘road furniture’ entailing the risk of much greater injury to those involved in accidents there. Moreover, it would afford the Ministry no defence to establish against a passenger that the particular accident was due to a type of negligence to which experience shows drivers are prone (see again London Passenger Transport Board v Upson), or that the precise cause of the accident was unexplained (cf Thorogood v Van Den Berghs and Jurgens Ltd ([1951] 1 All ER 682 at 691, [1961] 2 KB 537 at 554), per Asquith LJ).

There must, of course, always be a balance between the cogent need to provide the proper signs essential for safe motoring and the important need to avoid imposing undue risks of greater injury on the motorist. It is perhaps as well to add that when the sign is definitely off the carriageway only quite exceptional circumstances could

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lead to the need of a clearly visible sign taking completely second place. Moreover, in practice, the need for special siting to avoid undue risks will only arise where the configuration of the road makes it foreseeable that there is that type of above-average risk of serious accident which is now under consideration. In each case the balance assessed must, of course, depend on the facts of the particular case. Accordingly, the ministry’s contention that they were under no duty whatsoever fails.

The next issue is whether on the facts of the present case the Ministry were in breach of their minimum duty. All witnesses agreed that a massive sign only 4 feet off the carriageway constituted a hazard in the sense that it exposed to materially greater danger of injury any motorist who might inadvertently leave the carriageway and travel towards it at speed. That was obvious, and no less so because this particular sign happened to be one of the first of its type to be erected. The curve which led to Hollywell Brook was to a layman slight and innocent, but was from a road construction point of view described by the group engineer, Mr Gallagher, as ‘sharp’. It was thus to an extent deceptive as well as being substandard, in the sense already defined, as regards radius and safety. On the evidence, anyone skilled in road design could clearly foresee that drivers who had perhaps not the fullest degree of skill might leave the road, either with or without going into a skid, in certain conditions—whereas they would not so leave the road if, for instance, it had been straighter or better banked. In particular, this could happen in conditions when owing to heavy rain there was, as in the instant case, a thin layer of water on the road.

In a moment of perhaps rare lack of caution Mr Gallagher when seeking to exculpate the Ministry as regards this particular accident said—‘This was not a case of a vehicle going off the bend on the apex as one would expect’— and I venture to underline the words ‘as one would expect’. More importantly, perhaps, Mr Herbert, the divisional engineer, on 13 May 1966 wrote to the county engineer a letter which contained the following passage:

‘This sign is situated in the hollow south of the Hollywell Brook Culvert and, although in a position to be readily seen, is in such a position as to be hazardous to motorists. Its position is such that any vehicle leaving the bend tangentially would strike one or more of the concrete supporting columns.’

Moreover, the county surveyor on 3 August 1966, after having himself looked at the sign, wrote these words:

‘It does seem to me that although the advance direction sign is well sited from the point of view of giving good notice of the roundabout to traffic, in its present position it leaves very much to be desired on road safety grounds.’

The fact that vast numbers of cars have traversed this stretch without harm since June 1964, although a weighty matter, cannot tip the balance against the factor that, on the above evidence taken as a whole, an accident of this type, or, indeed, in due course a series of accidents of this type, was almost inevitable, and that when such an accident occurred it might very likely be disastrous. This danger could easily have been averted by siting the sign at an equally visible position further away from the bend, where the risks would have been greatly diminished. Accordingly, the learned trial judge was correct, in my view, when he said:

‘Thus I arrive at the conclusion that had a proper appreciation by a properly qualified person of the alternative hazards presented by alternative sites for this sign been made in December 1965 before the sign was sited the conclusion reached by a properly skilled engineer to whom the experience and guidance of the Ministry publications were available would have been that the sign in the position in which it was sited was foreseeably likely to give rise to unnecessary and grave hazard to users of the carriageway.’

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Equally correct was the view he expressed that: ‘… on the material before this court, there is nothing to suggest that any such appreciation was ever made’. Indeed, it is noteworthy that among the witnesses called for the Ministry there was no one who took part in or made the decision to site the sign; neither an officer at the ‘high level’ referred to by one of the witnesses, nor the gentleman, Mr Blake, who apparently operated at a lower level, but was personally responsible for the siting. In those circumstances, it is not open to the Ministry to say that the siting was only an error of judgment, for no one embarked on judging at all; one cannot have an error of judgment when no judgment has been attempted. Accordingly, the learned trial judge was, in my view, right on the issue of negligence in relation to the siting, and in particular on the issue of negligence in failing to consider that siting. So on this second issue the Ministry also fail.

One more issue was pressed before this court, although it must have been raised somewhat faintly at trial as it did not attract mention in the careful judgment before us. It was suggested that the damage suffered by the plaintiffs was in law not caused by the Ministry’s negligence because the accident was of a different type from that which the Ministry would have anticipated had it considered the matter. It was not exactly easy to see the basis for this contention, but I understood the suggestion to be that it was founded partly on the allegation that this was a skid as opposed to a leaving of the carriageway without a skid, and partly because the car did not move tangentially in the way referred to in the evidence of Mr Gallagher and Mr Herbert. On the facts, this contention appears to my mind to be too unreal to merit detailed examination. The accident was of a type that one would expect in bad weather on this substandard road, and to my mind that ends the matter. Accordingly, I would dismiss the appeal.

As regards the cross-appeal on apportionment, counsel for the driver clearly appreciated the difficulties which lay in his way by reason of what was said in the speeches in British Fame (Owners) v Macgregor (Owners). Those difficulties are insuperable; for, whatever view I might myself take in making an apportionment at first instance, there is nothing which entitles interference with the percentages assessed by the trial judge. I would accordingly also dismiss the cross-appeal.

WIDGERY LJ. I agree that this appeal and cross-appeal should be dismissed. I can find no fault either in the reasoning or in the conclusions of the learned trial judge. The first submission of counsel for the ministry, as I understand it, is that when siting this sign the Ministry of Transport had no duty of care towards a motorist who was himself guilty of negligence and whose negligence had caused his car to leave the carriageway and thus to be at risk of colliding with the sign. In my opinion, this is far too narrow a view of the duty of the highway authority. All motorists are guilty of errors of one kind or another on one occasion or another, and I think it would be quite unreal if roads were designed on the assumption that no driver would ever err. Indeed, as Lord du Parcq put it in London Passenger Transport Board v Upsona, ‘… a prudent man will guard against the possible negligence of others, when experience shows such negligence to be common.' It seems to me that that phrase is entirely apt to dispose of the submission that no duty of care was owed to a motorist in the position of the driver in this case. Of course, the duty of the highway authority is limited by the fact that it is only required to do what is reasonable in order to avoid reasonably foreseeable accidents. The liability of the highway authority in damages may be limited in amount, or may be excluded entirely as between the authority and

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a negligent driver. But, subject to those limitations, the duty is owed to all motorists generally.

The second submission of the ministry is that, given a duty of care on the lines to which I have referred, here there was no breach of the duty. This was a question which required—and I think received—very careful attention in the course of the trial below. The design and furnishing of modern roads is a very complex and technical matter in which the designer may be faced with a conflict between considerations concerned with the functional efficiency of the road and considerations of safety. Indeed, as this case illustrates, the designer may be faced with conflicting considerations each of which affects safety, as where a warning sign, which must be visible if it is to provide safety, cannot be placed in a position of visibility unless its situation presents some risk of injury to the driver of a car which may collide with it. I am very much in agreement with the learned trial judge when he says that in such a case, if a competent engineer designing a highway had weighed all these conflicting considerations and come to a conclusion on them, the court should be extremely slow to take a different view.

But, as appears in this case, that was not what happened here. This road over its relevant length had a gradient reaching a maximum of 1 in 19, and it terminated, as has been said, in a right hand bend. It is true that both the alignment of the bend and its banking satisfied the requirements of the standard to which the road was designed in 1959 and 1960; it satisfied, in other words, the requirement of ‘design speed 60 mph’. It is however, in my judgment, also quite clear that had this road been designed even two or three years later it would almost certainly have been designed to a higher standard, viz ‘design speed 70 mph.' I take that view from the fact that such a recommendation is contained in memorandum no 780, published in 1961, to which Sachs LJ has referred. By 1965 it must have been obvious to everybody that it was a pity, to say the least of it, that this road had not been designed to the higher standard. But the learned judge quite rightly acquitted the Ministry of any liability to damages on account of the choice of standard which they made. On the other hand, in 1965 it is fair to say that this was a sub-standard road in the limited sense to which I have referred, and it was clearly a road where motorists travelling at speed might get into difficulties, particularly in wet whether. It was also a road on which it was tolerably clear that, if a motorist did get into difficulties and lose control of his car, he was likely to leave the carriageway at a point at or near the apex of the bend.

It is against that background that the decision to site this massive sign in the path of such motorists has to be considered. There is no evidence that safety factors played any part in the decision to put the sign where it was put. There is no evidence of any technical difficulty which would have prevented it from being put in a place of greater safety—indeed, on the contrary, as soon as this accident occurred and the experts applied their minds to the question, they agreed at once that this sign, (at any rate in the absence of a guardrail) did present a source of danger—and the absence of any technical considerations requiring it to be placed where it was is amply demonstrated by the fact that it was moved without any trouble to a safer position further to the south in the direction of the roundabout.

I conclude on the evidence that it was the duty of the responsible engineer when siting this sign to consider the risk of collision as one of the factors affecting its siting. If this had been done by any competent engineer, it seems to me that he would have inevitably recognised both a serious hazard presented by the sign in that position, and the comparative ease with which that hazard could have been avoided by resiting. It seems to me that the failure to consider those matters and to reach that conclusion, and having reached the conclusion to put it into effect, constitutes a breach of duty on which the plaintiffs rely in this case.

Then one comes finally to the third submission of counsel for the Ministry, viz that, given the existence of a duty, and given the breach of that duty in the terms to

Page 152 of [1970] 1 All ER 144

which I have referred, the sign was not in law a cause of the accident. I fully accept that, notwithstanding the negligence of the designer, he would not have been liable to a motorist who collided with the sign for some reason wholly unconnected with the particular risks which had justified the conclusion that the siting of the sign was dangerous. Counsel’s contention is that the particular risk in this case was that a car out of control might leave the carriageway at a tangent to the bend, whereas he says that the car in question first skidded to the offside of the road and only hit the sign as a result of bouncing off the kerb on the offside. If an accident happens in this way it is said to be not reasonably foreseeable and, therefore, not a matter for which the Ministry are responsible. Here, again, I think the view contended for is far too narrow. We do not know precisely how this car behaved in the last split second before the accident. But it did get out of control while approaching the bend, and it did leave the road at or about the apex of that bend. On the face of it, the accident arose out of just the kind of risk which had made the siting of the sign dangerous, and I do not think that such evidence as there is of prior contract with the opposite kerb invalidates this reasoning.

as to the cross-appeal, I have nothing to add to that which has been said by Sachs LJ with which I agree.

RUSSELL LJ. I also agree that the appeal and cross-appeal should be dismissed. The contention that in siting these signs the Ministry had no duty of care to vehicles leaving the road because of negligent driving cannot be supported. Counsel for the Ministry in submitting this had to go to the length of suggesting that equally there was no duty owed towards a vehicle leaving the road without negligence, and this seems to me to be plainly wrong. The presence of these traffic signs on four substantial concrete posts just off a fast traffic highway is a plain danger to vehicles which leave the highway whether through negligent driving or without negligence. It is well known that vehicles do leave such a highway at speed from time to time. The duty to take reasonable care to avoid a danger obviously does not require the Ministry not to erect such signs at all at places appropriate to their function, but the duty does, in my view, require that reasonable steps to minimise the dangers should be taken. If a choice of sites is available, both consistent with the proper functioning of the sign, then, in my judgment, the duty of reasonable care requires that consideration be given to the question of relative probability of a vehicle leaving the road and passing over one site rather than the other. If it should be that, due to the design or configuration of the road in the vicinity of one such site, there is a substantially greater probability of vehicles leaving the road and striking the site, then the duty extends to rejecting that site in order to minimise the danger. In this case, I consider that the duty required the Ministry to avoid the site on which the sign was erected because the design and configuration of the road was such as I have mentioned, and there was obviously an alternative site at which the sign is now erected.

It was argued that on the evidence given the only feature in the site chosen which made it substantially more likely that a vehicle would leave the road and would hit it was that the configuration and design of the road would tend to make a vehicle go straight off the road at a tangent to the bend. The evidence was that this car slid or skidded from the nearside lane to the offside and struck the kerb, thus causing it to twist around and it then left the road and hit the sign. So it was said that there was no causation because the accident that happened was in no way related to the considerations stated in evidence that should have persuaded the Ministry to site the sign elsewhere than they did. In my view, this is too narrow a view of the facts and the evidence. In truth, the danger recognisable in the design and configuration of the road in this area was one which involved possible loss of control of a vehicle, a loss of control which could by more than one route precipitate the vehicle on to the selected site of

Page 153 of [1970] 1 All ER 144

the sign. Accordingly, I agree with the learned judge on the liability of the Ministry, and on the cross-appeal I have nothing to add.

Appeal and cross-appeal dismissed. Leave to appeal to the House of Lords refused.

Solicitors: Treasury Solicitor; Freeland & Passey, Birmingham (for the driver).

F A Amies Esq   Barrister.

von Mehren v von Mehren

[1970] 1 All ER 153

Categories:        FAMILY; Ancillary Finance and Property        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        DAVIES, WINN AND KARMINSKI LJJ        

Hearing Date(s):        31 OCTOBER 1969        

Divorce – Maintenance of wife – Lump sum payment – Additional to annual sum – Relatively rare cases – Husband’s modest fortune (£8,000) – Pension and earnings £2,200 – House for wife and children – Provision out of husband’s and wife’s contributions – Lump sum £4,000 towards cost – Trust deed to be entered into – Reversion of house to husband if surviving wife and children – Matrimonial Causes Act 1965, s 16(1).

A wife obtained a divorce from her husband on the ground of his adultery, and made an application for maintenance for herself and the two children, a daughter of nine and a son of five. The husband was 53 years old, the former shipping master at Lagos with a pension for his services, who since returning to Britain had had several jobs although at the relevant time he was looking for work (his health had not always been good), but he subsequently found highly reputable employment in a bank at an annual salary of £1,274 plus £50, bringing his total income up to about £2,200 a year. He had a modest fortune invested (about £8,000). The wife was 11 years younger. She was a state registered nurse, had worked as such and had had other employments, but she had to look after the two children. Money provided by the husband out of his capital with money provided by the wife had been used to buy a house in the Isle of Wight which served as a home for the wife and the children, and which could be let as a guest house to paying guests for part of the year (Easter to the end of October), with perhaps a potential profit of £200 a year. The judge made an order under s 16(1) of the Matrimonial Causes Act 1965 for the husband to pay to the wife (or trustees) a lump sum of £4,000 by way of secured provision and £10 a week for maintenance for herself and the two children (£4 to the wife and £3 to each child), but subject to an undertaking that a trust deed would be entered into under which the wife would have the use of the house for her life, it would then pass to the children and it would finally revert to the husband if he survived them.

Held – Although orders for payment of lump sums for maintenance had mostly been concerned with much larger fortunes and could only be made in ‘relatively rare’ cases (dicta of Willmer LJ in Davis v Davis [1967] 1 All ER at 126, and in Hakluytt v Hakluytt [1968] 2 All ER at 871, applied), the order must be confirmed as being made in one of those ‘relatively rare’ cases because it had the great advantage of giving the wife and children a settled and secure home, and the compensating advantage for the husband of his being ordered to pay a much lower annual sum to the wife than on the usual joint-lives order and of his reversion to the house if he survived the wife and children (see p 157 a, f and g, post).

Notes

For the amount of maintenance in divorce, see 12 Halsbury’s Laws (3rd Edn) 436–438 para 982, and for cases on the subject see 27 Digest (Repl) 616–620, 5765–5791.

Page 154 of [1970] 1 All ER 153

For the Matrimonial Causes Act 1965, s 16, see 45 Halsbury’s Statutes (2nd Edn) 468

Cases referred to in judgment

Davis v Davis [1967] 1 All ER 123, [1967] P 185, [1966] 3 WLR 1157, Digest (Repl) Supp.

Hakluytt v Hakluytt [1968] 2 All ER 868, [1968] 1 WLR 1145, Digest (Repl) Supp.

Cases also cited

Brett v Brett [1969] 1 All ER 1007, [1969] 1 WLR 487.

Curtis v Curtis [1969] 2 All ER 207, [1969] 1 WLR 422.

Interlocutory appeal

The husband appealed against an order of his Honour Judge Lee QC made on 25 July 1969, that Paul Christian von Mehren, the husband, should pay to Cynthia von Mehren, the wife, or trustees by way of secured provision the sum of £4,000, and also the sum of £10 per week maintenance for the wife and the two children of the family, divided as to £4 per week for the wife and £3 per week for each of the two children. The grounds of appeal were as follows: (1) on the facts as found by the judge the husband was entitled to judgment; (2) the judge misdirected himself in that he directed himself that his order was just and reasonable having regard to the financial position of the wife and the husband; (3) having regard to the financial positions of the wife and the husband on 25 July 1969 the judge’s order on that date was such that he was wrong in law and on the facts in deciding that the wife was entitled to judgment in the sums ordered; and (4) the amounts ordered to be paid by the husband to the wife by way of secured provision or capital payment and maintenance were each of them excessive. The facts are set out in the judgment of Karminski LJ.

A Lipfriend for the husband.

R N Titheridge for the wife.

31 October 1969. The following judgments were delivered.

KARMINSKI LJ delivered the first judgment at the request of Davies LJ. This is an appeal by the respondent husband against an order as to maintenance made by his Honour Judge Lee QC on 25 July 1969. The judge (who was hearing an appeal from the district registrar at Newport in the Isle of Wight) made an order broadly affirming the registrar’s order, varying it slightly. The order made by the learned judge below was that the husband should pay to the petitioner wife and/or trustees by way of secured provision £4,000 and, in addition, that he should pay her the sum of £10 a week maintenance for herself and the two children of the family, divided as to £4 to the wife and £3 for each child. The children are quite young children, the girl being rising nine and the boy I think about 5 1/4. They are with the mother, who got a decree nisi of dissolution against the husband on the ground of his adultery. No sort of charge was raised against her—it was an undefended suit—nor did she ask for the exercise of the court’s discretion. The order made by the learned registrar was very much the same as that made by the judge, but he apportioned the payments to the wife somewhat differently; and it is not necessary to go into that.

This appeal is founded on a complaint that it was wrong, in all the circumstances, to order payment of £4,000 to enable her to purchase a home for herself and for the children; but that instead he should have made what could be termed the more usual order of making proper provision for the wife during joint lives, and for the children until they attained an appropriate age judged by their educational and other needs.

The parties were married in September 1958, the husband being now 53 and the wife some 11 years younger. The wife, it is said and accepted, is a lady of professional

Page 155 of [1970] 1 All ER 153

attainments. She is a state registered nurse who has worked as such and has had other employments. It is suggested that she might be able to earn something now. Against that, of course, there is the difficulty from her point of view that she has to look after two quite young children. If she took even a part-time job away from home, it would react adversely on the welfare of the children. With that attitude, I myself have great sympathy.

The husband is a man who for many years worked overseas in fact held the very responsible position of shipping master at Lagos in Nigeria. That employment came to an end some time ago, no doubt because of political changes. It is not at all suggested in this case that the husband is a man of idle disposition, or a man who had not obtained work here on his retirement from the Lagos service. He has a pension in respect of that service. He also has a modest fortune invested. Since he returned to this country, he has had a number of jobs, the last one being at Croydon; this he had to give up, but not through any fault on his part. When the matter came before the registrar and later before the learned judge, he was in fact looking for work and had not found any. That perhaps, having regard to his age and experience, was not altogether surprising. But in fact he has, since the order was made, found highly reputable employment in a bank at an annual salary of £1,274 plus £50, making in round figures a little over £1,300 a year. Of course, his pension from Lagos remains.

What is complained of in this case is that the learned judge, affirming the learned registrar below, has as it were taken away from this husband something like half his capital. It is also right to remind myself that the wife has parted with the same proportion of her capital.

An order of this kind can be made under s 16 of the Matrimonial Causes Act 1965, which enables the court to require the husband to secure an annual sum for a term not exceeding her life, or an order requiring the husband to pay to the wife during their joint lives a monthly or weekly sum for her maintenance, or thirdly an order requiring the husband to pay to the wife such lump sum as the court thinks reasonable. In this particular case, it rather looks as if the learned judge made an order under s 16(1)(c), but in part bringing in an order under s 16(1)(a); because what happened was this. Money provided by the husband out of his capital, joined with the money provided by the wife, went to buy a house in the Isle of Wight, where she lives, which would serve as a home for the wife and the two children of the marriage. It also could be let, at any rate for part of the year, to paying guests; in other words as a boarding house in the island. We were told by counsel that the period guests might come would last at least six months, ie from just before Easter until somewhere about the end of October. It is anticipated by the wife that, all being well, she would make from this boarding house a profit of something like £200 a year for herself—a modest profit, but I would hazard a guess one that might well be attained. But the attraction from the wife’s point of view of course would be that she would have a home of her own in no doubt a pleasant part of the island where she would not have to pay rent, and where she could live without anxiety and make a small profit from it.

It is important here that this sum to be paid by the husband was not an out-and-out gift by him to the wife. It was understood by the solicitors that, when the order is carried out, there should be a trust deed; so that the wife would have the use of this property for her life, then to the children, and if the husband survived the wife and the children, then it should revert to him. No deed yet has been drawn up, because of this appeal. But I have not the slightest doubt that the terms agreed in principle between very experienced solicitors, if this order stands, will be carried into effect. Indeed before this court at the end of last term, on 31 July, an undertaking was given by the wife, through her counsel—

‘… to use the money to be paid by the husband only for the purpose of the

Page 156 of [1970] 1 All ER 153

purchase of the property and not to attempt to dispose of the property pending appeal.’

That undertaking has of course been honoured.

Now, the position is this. Counsel for the husband in a very persuasive address has put before us not only the principles to be considered, but the position here. The husband’s income through his new employment has gone up to something like £2,200 a year, and therefore a much more realistic order could be made under s 16(1)(b) to pay by the husband during their joint lives than could have been done when the matter was before the registrar and the judge. There is great force in that argument. On the other hand, one has to consider, from the wife’s point of view as her counsel reminded us, the imponderables in a case of this kind. The wife is considerably younger than the husband, so that her expectation of life is longer. It was said on behalf of the husband that his health had not always been very good. He lived in the tropics for a number of years; and it was possible that, however hard he worked or tried, he might not continue, having regard to health and age, in the present employment indefinitely. So this was a case, said counsel for the wife, where security was called for.

Counsel for the husband argued that not only would the wife for the time being be better off financially, at any rate on the short term, if she took a joint-lives order without this kind of security; but that it was against the usual practice in cases where the capital available was modest in amount to make an order of this kind. He relied on two cases, in both of which Willmer LJ dealt with the position. The first was Davis v Davis, in which Willmer LJ said ([1967] 1 All ER at 126, [1967] P at 192):

‘As a practical matter, it is clear that an order for a lump sum payment can only properly be made against a husband possessed of sufficient capital assets to justify it. It is not to be expected, therefore, that the question is likely to arise except in relatively rare cases.’

In Hakluytt v Hakluytt Willmer LJ reaffirmed his views by saying ([1968] 2 All ER at 871, [1968] 1 WLR at 1149):

‘I do not feel at all repentant about that; I think that is right. It can only be in relatively rare cases that the question is likely to arise.’

In the cases which have been reported and brought to our attention, the common feature was that very large capital sums had been available, and orders were made against the husband to part absolutely to a wife with a very large capital sum which she was at liberty to dispose of as she thought fit; to buy a house or to invest the money, or even, it was suggested in the course of argument, to put the money on a horse. That does not arise in this particular case, because it is contemplated, and I repeat that undertakings have been given to the court, that this money is to be held in trust on the terms I have already mentioned.

I am prepared to accept that in the comparatively short time, starting in 1963, since the courts have had the power to order lump sums for maintenance in this way, most of the cases have been concerned with fortunes much larger than that in the present case. Indeed I agree entirely that the cases in which lump sums can be ordered are of necessity relatively rare. I rely only on my own experience in these matters, but I would hazard a guess that it is in only a small minority of cases, in possibly not as much as 5 per cent of the total of maintenance orders, when an order of this kind could possibly be made. I do not for a moment desire even to suggest a figure below which such an order could properly be made.

In this case, the figure is, roughly speaking, £8,000 capital. Having regard to all

Page 157 of [1970] 1 All ER 153

the circumstances of this case, I think it comes within the category of what Willmer LJ described as ‘relatively rare’. It has the great advantage here, from the wife’s point of view, of giving her a settled and secure home. It has the same advantage for the children of this marriage. It has the compensating advantage to the husband that, in the result, he is being ordered to pay to the wife a much lower sum than he would be ordered to pay if this was the usual joint-lives order, even allowing for the extra for the children; and he has the perhaps rather remote benefit that, if he survives his wife and the two children, the money which has gone into this home will come back to him.

For those reasons, I have come to the conclusion that, on the facts of this particular case, the order of the learned judge was right; and I would myself dismiss this appeal.

DAVIES LJ. I agree and add but very little. I do appreciate that the husband feels it very hard that he should be ordered to put out of his own possession and control some four-fifths of his invested capital. I follow that. But, as has been said by Karminski LJ and was pointed out by Winn LJ towards the end of the argument, this is not strictly an order for the payment over of the money, as was the case in the authorities that we looked at and as is precisely covered by the relevant subsection. For the husband here is not losing, and will not lose, all interest in this money. It is true that his available capital will be considerably cut down, but the house will be there and presumably, one hopes, will not depreciate to the same extent as possibly other holdings have depreciated in recent months.

Again, as has been pointed out by Karminski LJ in his judgment, because the husband is paying over this sum to be invested in the purchase of a house, he is by the same token substantially escaping a large portion of the maintenance that he would otherwise have to pay to his wife and children. He is now under an obligation to pay a total sum, in round figures, of £500 a year; and but for this house transaction, I think he would almost certainly have to pay something over £1,000. So he is having that benefit from this transaction. Part from that, I do not think that I wish to add anything to what has been said by Karminski LJ, with all of which I entirely agree. I merely add that there will have to be from counsel for the wife a fresh undertaking with regard to this money and this house; but we will deal with that after Winn LJ has given judgment.

WINN LJ. I am content merely to commend the advisers of the wife for the way in which they have dealt with this matter, and to express the hope that the profession will become informed, by law report or articles, of the very sensible, practical and economic way in which this problem has in this particular case been handled. I agree the appeal should be dismissed.

Appeal dismissed. Undertaking, through counsel, by the wife not to dispose of or charge the house pending the execution of a trust deed to be agreed between the parties; liberty to apply to the judge of the county court with regard to the trust deed.

Solicitors: Good, Good & Co (for the husband); Robinson, Jarvis & Rolf, Cowes, Isle of Wight (for the wife).

F A Amies Esq   Barrister.

Wolverhampton and Dudley Breweries Ltd v Warley County Borough Council

[1970] 1 All ER 158

Categories:        LEISURE AND LICENSING        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD PARKER CJ, ASHWORTH AND CANTLEY JJ        

Hearing Date(s):        11 NOVEMBER 1969        

Gaming – Amusements with prizes – Application for permit in respect of public house – Whether principle that drinking and gambling do not mix applicable – Betting, Gaming and Lotteries Act 1964, s 3.

Applications for permits under s 3 of the Betting, Gaming and Lotteries Act 1964 to provide at particular public houses amusements with prizes were refused on the general principle that drinking and gambling do not mix.

Held – This was not a valid reason for refusing the permits except perhaps in particular circumstances (see p 161 b, e and g, post).

Meade v Brighton Corpn (1968) 67 LGR 289 applied.

Notes

For application for grants of permits for amusements with prizes, see Supplement to 18 Halsbury’s Laws (3rd Edn) para 469B, 3.

For the Betting, Gaming and Lotteries Act 1964, see 14 Halsbury’s Statutes (3rd Edn), 664.

Cases referred to in judgment

Capper v Baldwin [1965] 1 All ER 787, [1965] 2 QB 53, [1965] 2 WLR 610; 129 JP 202, Digest (Cont Vol B) 320, 316c.

Meade v Brighton Corpn (1968) 67 LGR 289.

Case stated

This was an appeal by way of case stated by Wolverhampton and Dudley Breweries Ltd from the dismissal by Warley Quarter Sessions (recorder Francis Barnes Esq) of their appeal from the refusal of Warley County Borough Council to grant to the appellants permits for the provision of amusements with prizes at four particular public houses. The respondents refused the applications on the ground that, by reason of the purposes for which the public houses were or were to be used, it was undesirable that amusements with prizes should be given but did not describe or elaborate on the reason. The facts are set out in the judgment of Ashworth J.

R J S Harvey for the appellants.

Paul Wrightson QC and I G McLean for the local authority.

11 November 1969. The following judgments were delivered.

ASHWORTH J. This is an appeal by way of case stated from a decision of the learned recorder for the county borough of Warley, before whom the appellants came by way of appeal from the refusal of the local authority to grant them permission for the provision of amusements with prizes at four public houses, the Bull’s Head, Rowley Regis, the Brickhouse Inn, Springfield, the George and Dragon, Rowley Regis and the Vine, Rowley Regis. When the applications were made to the local authority, the ground of its refusal was that by reason of the purposes for which the premises were, or were to be, used, it was undesirable that amusements with prizes should be provided. Those grounds of refusal reproduced in similar

Page 159 of [1970] 1 All ER 158

words the language of s 3(1) of the Betting, Gaming and Lotteries Act 1964a. Section 3(1) provided:

‘… without prejudice to any ground on which the local authority might have refused to grant or renew the permit if this subsection had not been passed, the local authority may refuse to grant or renew the permit on the ground that, by reason of the purposes for which, or the persons by whom, or any circumstances in which, the premises are, or are to be, used, it is undesirable that amusements with prizes should be provided thereon.’

Faced with those refusals, the appellants appealed, as they were entitled to, to the learned recorder, giving as their reasons that the refusal was wrong in law; secondly, that no valid reason for the refusal had been given; thirdly, that the refusal was contrary to the weight of the evidence; and fourthly, that the local authority had not exercised its discretion judicially.

The appeals came on before the learned recorder so long ago as 30 April 1968 and he gave judgment on the following day. He was asked to state a case and the present appeal comes before this court by way of the case so stated. It is, if I may say so, stated in somewhat unusual form, and counsel on both sides have found themselves slightly embarrassed because, instead of finding facts in the usual form of a list of the facts, that the tribunal find proved, the learned recorder in this case has started his case stated by setting out some contentions, and then reciting a good deal of evidence, and then summarising some more contentions, and eventually reaching his conclusions. As far as my judgment is concerned, I do not feel embarrassed by the way this case is stated, and I only mention these matters because in other circumstances this method of stating the case might give rise to difficulties.

It seems that the main point put forward on behalf of the local authority is to be found in a paragraph of the case stated, which is as follows:

‘Counsel for the [local authority] addressed me putting up the following grounds in favour of the refusal by the Local Authority (1) Drinking and gambling do not mix, in the sense that a man who has had some drink may to some extent lose his self-control and spend more than he should properly afford upon a gaming machine. (2) Secondly, that a man winning a windfall would be likely to have a drink or drinks to the extent of the 5s. token and this might bring his alcohol content over the limit laid down in the Road Safety Act 1967. (3) [which I only mention in order to discard] That the machines made a certain amount of noise that appealed to young people but might disturb the older people in the bars. (4) That the tradition of the English public-house was spoiled and there might be customers who objected on principle to gambling who would be offended. [I pause there to say that according to the case stated there was not an atom of evidence to make good that contention.] (5) [Counsel] submitted that the Local Authority were entitled to refuse these applications in what had been described as a “blanket” manner provided it did so for sound general reasons.’

Having set out those contentions the learned recorder then went on to state that he was not satisfied one way or the other on the contention that there had been a blanket refusal. Later he stated:

‘I came to the conclusion that two of the grounds put by [local authority’s] counsel in his address were valid ones—(a) that alcohol and gambling did not mix, in the sense that the consumption of alcohol may weaken resistance to the temptation to behave stupidly and spend more money than one can properly afford upon a gaming machine … [then there is a lengthy reason expanding and reproducing the second reason advanced by the local authority itself linking

Page 160 of [1970] 1 All ER 158

gaming machines with drink and the Road Safety Act 1967] I further considered, as a matter of basic principle, that in a democratic system such as an elected local government, the remedy was in the hands of any of the electors who wished to have this facility in their public houses to elect to their local council, councillors of similar opinions to their own.’

With the greatest respect to the learned recorder, that is a complete negation by the recorder of his function as an appellate tribunal and in no way discharges him from the task of considering for himself whether these refusals were justified.

So far as I am concerned, the reason why the learned recorder upheld the refusals can be limited in effect to the basic principle that drinking and gambling do not mix, and the additional feature introducing the Road Safety Act 1967 is to my mind only a practical illustration of what he conceives to be the dangerous practice of drinking and gambling together. No doubt his attention was called to cases that are relevant and to sections that are relevant; but it is slightly surprising to find, as the principal reason justifying these refusals, something which the legislature itself seems to have permitted.

The matter came before this court in Capper v Baldwin and I cannot resist the temptation to which counsel for the appellants succumbed of quoting from the argument of counsel for the local authority in that case; he submitted ([1965] 2 QB at 58):

‘Section 141 of the Licensing Act, 1953, prohibits all forms of gaming in public-houses. When the legislature amended that section by section 40 of the [Betting, Gaming and Lotteries Act 1963], it could not have been the intention to allow gaming machines in a public-house provided that part of the stakes were applied for private gain.’

But that was not a successful argument as was pointed out by counsel for the appellants. Lord Parker CJ in giving judgment dealt with it in this way ([1965] 2 QB at 59, [1965] 1 All ER at 790):

‘The facts have only to be stated to make one feel that something is very odd in having a machine such as this in a public-house. Starting with the impression that Parliament could not have intended that, and going, in the first instance to Section 141 of the Licensing Act, 1953, one finds that, if the holder of a justices’ licence suffers any gaming to be carried on in his premises, he shall be liable to a penalty. But the Betting, Gaming and Lotteries Act, 1963, makes it perfectly clear that under certain conditions a machine such as this can be operated in a public-house. In particular, Section 40 provides specifically that in Section 141 of the Licensing Act, 1953, any reference to gaming shall be construed as a reference to the playing of any game in such circumstances that an offence under Part II of the Act is … ’

I think that the words there should be ‘not permitted’.

I need not refer in detail to the amending Act of 1963, but it seems to me that in the case of that legislation it is quite impossible to say that there is a Parliamentary principle that drinking and gaming do not mix, and to put that as the foundation of the refusal in the present case seems to me to be running completely counter to the views expressed by Parliament and recorded in the Act. Of course there are times when particular public houses may be so situated or so frequented that there is a particular menace in having drinking and gambling together, but having read this case with care and in particular such evidence as is set out in it, it is noteworthy that the objections are not as I see them directed to these public houses at all; they are directed to public houses in general, and it was only at a fairly late stage in the case that any specific attention was paid to the public houses themselves, or the

Page 161 of [1970] 1 All ER 158

people who frequent them. The truth is as I see it that the local authority took the view that these machines should not be installed in public houses; the case shows that in that regard they were following their neighbours at Walsall, but not following the example of many other local authorities in the same area.

I ask myself whether it can be said that applying that basic principle of ‘drinking and gambling do not mix’ the local authority and the learned recorder respectively have applied their minds properly to the question whether a permit should be issued for these four public houses for gaming? It is not uninteresting to see that a similar sort of problem came before this court a year ago; the case is Meade v Brighton Corpn and the same Act was under consideration then, namely the Betting Gaming and Lotteries Act 1963, but the premises involved were not public houses; on the contrary the Brighton Corporation seem to have been generous in their grant of permits to places of that type. The place in question was a transport café and after permits had been refused, the learned recorded upheld that refusal. I quote from the report where it is stated ((1968) 67 LGR at 292):

‘Apparently this Local Authority had a general policy that they would not grant permits to any café, and of course if in any case a café gets a permit, no doubt it will give rise to a flood of applications. For my part I agree with Mr. McCowan; that is a matter which ought not to have been taken into consideration.’

In effect in the Brighton Corpn case there was the same bar on transport cafés as the local authority here seems to wish to impose on public houses. I take the view that in the light of the cases to which I have referred, that principle is not one which they can apply generally in exercising their discretion whether or not to grant a permit. It is a bad reason in law and would not justify the refusal. I say nothing more about the reason which was put forward that drinking might tend to endanger the gamblers in regard to the Road Safety Act 1967; as already mentioned it is really a practical example of the main general principle; but having mentioned it, I would venture to say that I do not agree with it. Nor do I agree, speaking only for myself, with this alleged principle of ‘drinking and gambling do not mix’ on the footing that they are companions leading to wrong-doing or misbehaviour of one sort or another; it is one which I find unattractive and unreal. However that may be, I am quite satisfied that in this case these refusals were based on a wholly wrong principle and I would allow this appeal and remit the case to the recorder with a direction to issue the permits.

CANTLEY J. I agree.

LORD PARKER CJ. I also agree.

Appeal allowed. Case remitted.

Solicitors: Oswald Hickson, Collier & Co, agents for Thursfield & Adams, Kidderminster (for the appellants); Sherwood & Co, agents of Kenneth Pearce, Smethwick (for the local authority).

E H Hunter Esq   Barrister.

W & J Lane v Spratt

[1970] 1 All ER 162

Categories:        INSURANCE        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        ROSKILL J        

Hearing Date(s):        28, 29, 30 JULY 1969        

Insurance – Bailee – Carrier’s insurance under goods in transit policy – Clause providing that insured shall take all reasonable precautions for the protection and safeguarding of goods – Lorry driver employed without reference being checked – Lorry and load stolen – Whether clause referred to selection of staff or only to protection of physical safety of goods – Need for failure to take precautions to be reckless not merely negligent.

After one unsuccessful attempt to take up the reference he had offered, the plaintiffs engaged as a lorry driver a man calling himself T. The next day T disappeared with one of the plaintiffs’ lorries and the load of bacon which was on it. A claim was made against the plaintiffs in respect of the loss of the bacon and the plaintiffs brought an action against the defendant, the underwriter, under a goods in transit policy, claiming indemnity. The defendant claimed that the failure to verify T’s reference or to take precautions to ascertain his true character was a breach of the plaintiffs’ obligations under cl 9 of the policy thus relieving the defendant from liability. (Clause 9 provided: ‘The Insured shall take all reasonable precautions for the protection and safeguarding of the goods and/or merchandise and use such protective appliances as may be specified in the Policy and all vehicles and protective devices shall be maintained in good order. Such devices shall be used at all times and shall not be varied or withdrawn without written consent by the Underwriters … ’)

Held – The defendant’s contention failed and the plaintiffs were entitled to indemnity because—

(i) the words ‘the Insured shall take all reasonable precautions for the protection and safeguarding of the goods and/or merchandise’ could not be construed in isolation from the remainder of the first sentence and the second sentence of the clause and the impression on reading the clause as a whole was that it was not intended to cover the selection of staff but was limited to what was mentioned in the clause, namely the need to protect the physical safety of the goods (see p 168 g, post);

(ii) alternatively, if the obligation on the plaintiffs under the policy were extended to the taking of all reasonable precautions in the selection of staff, it was insufficient to show that they neglected to take reasonable precautions, they would have had to have been reckless in their disregard for the safety of the goods, and this had not been proved (see p 172 c, post).

Dictum of Diplock LJ in Fraser v B N Furman (Productions) Ltd [1967] 3 All ER at 60 applied.

Notes

For conditions precedent to liability under an insurance policy, see 2i Halsbury’s Laws (3rd Edn) 219, para 413, and for cases on the limitation of the insurer’s liability see 29 Digest (Repl) 510, 511, 3600, 3606.

Cases referred to in judgment

Carter (John) (Fine Worsteds) Ltd v Hanson Haulage (Leeds) Ltd [1965] 1 All ER 113, [1965] 2 QB 495, [1965] 2 WLR 553, [1965] 1 Lloyd’s Rep 49, Digest (Cont Vol B) 72, 254c.

Concrete Ltd v Attenborough (1940) 65 Lloyd, LR 174, 29 Digest (Repl) 510, 3601.

Fraser v B N Furman (Productions) Ltd (Miller Smith & Partners, Third Parties) [1967] 3 All ER 57, [1967] 1 WLR 898, [1967] 2 Lloyd’s Rep 1, Digest (Repl) Supp.

Page 163 of [1970] 1 All ER 162

Pictorial Machinery Ltd v Nicolls (1940) 164 LT 248, 67 Lloyd, LR 461, 29 Digest (Repl) 555, 3766.

Suisse Atlantique Société d’Armement Maritime SA v N V Rotterdamsche Kolen Centrale [1966] 2 All ER 61, [1967] 1 AC 361, [1966] 2 WLR 944, Digest (Cont Vol B) 652, 2413a.

Woolfall & Rimmer Ltd v Moyle [1941] 3 All ER 304, [1942] 1 KB 66, 111 LJKB 122, 166 LT 49, 29 Digest (Repl) 510, 3602.

Yorkshire Dale Steamship Co Ltd v Minister of War Transport, The Coxwold [1942] 2 All ER 6, [1942] AC 691, 111 LJKB 512, 167 LT 349, 29 Digest (Repl) 237, 1790.

Action

This was an action by the plaintiffs, W & J Lane, a firm of haulage contractors, claiming a declaration that the defendant, Michael Valerie Spratt, an underwriter at Lloyd’s, was liable to indemnify them in respect of his due proportion of a claim made against them. The facts are set out in the judgment.

R L Johnson for the plaintiffs.

Anthony Evans for the defendant.

30 July 1969. The following judgment was delivered.

ROSKILL J. The plaintiffs in this action, W & J Lane, are a firm of haulage contractors. They were founded in the last century. Control has descended through marriage to two brothers, Mr John Cannon and Mr George Cannon, both of whom have given evidence before me. They claim from the defendant, who is an underwriter at Lloyd’s, a declaration that he is liable for his due proportion of a claim made against the plaintiffs in respect of the loss of a valuable quantity of bacon which was stolen on 21 August 1968. The claim against the plaintiffs and the present litigation arises by reason of the activities of a man about whom the only known fact is that his name was not Trout. The story starts on the afternoon of 20 August last year. At that time Mr John Cannon, who had the misfortune to lose his sight some years ago and is blind, and his daughter, Miss Valery Cannon, were at the plaintiffs’ offices. According to them, there arrived at their offices seeking employment as a driver a man who came from a labour exchange and brought with him a green card. The plaintiffs at that time had nine lorries. They were, like other haulage contractors, desperately short of drivers. It is plain that Mr John Cannon and Miss Cannon were delighted that the labour exchange had sent a candidate for employment. This man produced the green card which purported to introduce ‘Mr J R Trout in reply to your [ie the plaintiffs’] request for drivers’. There followed on the printed form ‘References have not been taken up’. Then in a box in the middle was a reference number: ‘TR 194’ which I am told means temporary registration 194. There was a conflict between whom the interview with the bogus Mr Trout took place. Mr John Cannon and his daughter both said that they alone interviewed this man. The defendant called a police officer who produced two statements made two days after the incident, namely, on 22 August. Both those statements, one by Mr John Cannon and one by Mr George Cannon, state that Mr George Cannon was present at this interview. Mr George Cannon gave evidence as did Mr John Cannon and both flatly denied that Mr George Cannon had been present on this interview. [His Lordship considered the conflicting evidence and concluded that:] Mr John Cannon and Miss Valery Cannon were at the original interview and Mr George Cannon was not.

What happened was this. Mr John Cannon, as I have already mentioned, is unhappily blind. The applicant, the bogus Trout, was seen first of all by Miss Valery Cannon who formed her own impression of him, which was by no means unfavourable, and then took this man in to see her father. Her own account of what happened was this:

‘On the 20th August Trout came. He had a green card. He handed it to me.

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He was very tidy looking and spoke well. We have had worse. He was asked about his previous employments. He said he had worked for a firm dealing in bankrupt stock but he did not say why he had left. He gave me a name and address which I cannot remember. I tried to get in touch by telephone but there was no reply and I got the number from the telephone directory.’

On a bit of paper Miss Cannon wrote down two addresses and a telephone number. She had, I think, no very accurate recollection nearly a year later of what these precisely represented, but she thought that the top address which is Elmington House, Manor Place, Elmington Estate, Camberwell, SE 5, represented what Trout had said to her, whereas the bottom address 23, Drayton House, Elmington Estate, SE 5, may have represented what appeared on a driving licence which Trout produced on this occasion. There is also on that bit of paper a New Cross telephone number: New Cross 4461, but that is the telephone number of a labour exchange and was clearly not the telephone number which was supplied by Trout. According to Miss Cannon, she tried to ring the number of the firm in the West End which she got from the telephone directory but there was no reply. There the matter rested.

Mr John Cannon told me in evidence that this man had come and was interviewed by him and his daughter; that he did most of the talking; that Trout gave his name, address and age; that he, Mr John Cannon, asked him for whom he had worked previously and that the man gave him a name and address of a firm in the West End which had bought up bankrupt stock. Mr Cannon went on:

‘My daughter tried to ‘phone the number but that was as far as we went. I told the man it was heavy work. He said he was not frightened. He spoke well, and my daughter told me that he was the cleanest and most respectable chap we had had in the office for some time.’

That interview ended, if Mr John Cannon’s evidence be correct, with a single attempt to check the reference which failed and with the man being told to report next day round about 6.00 am. On the next morning the man did report and was joined by Mr George Cannon. Mr George Cannon was aware that he was coming and sent him off to the docks to collect some orange juice. He said that—

‘It was 6 o’clock on that morning, the 21 August, that I first met Trout. I expected him. My brother told me he was coming. I had not interviewed him on the 20th. I asked to see his licence which I saw. He handled the vehicle well. I sent him to Deptford to collect 50 cases of orange juice which he unloaded. He seemed very keen and competent. I had no suspicion whatever. He had gone alone to collect the orange juice. He then had a conversation with my brother on his return about his cards and his P 45 form. I then went with him to Simons Wharf to collect the 81 bales or sides of bacon. I took the delivery orders with me to identify the bacon. Trout and I put the bacon on the lorry. I showed him how to do it and then what I last saw was Trout pulling away from the wharf’

and Mr George Cannon telephoned to his office to say that the lorry was on its way. That was the last which was seen of the lorry for some days and the last ever seen of the bacon.

There was a good deal of controversy whether Mr John Cannon’s and Miss Cannon’s evidence about this attempt to take up the reference was accurate. It is right to say that in the statements given to the police to which I have already referred, there is no reference to any taking up of references actual or attempted, nor is there in any other relevant document. There is a statement (plainly hearsay) in a document on the assessors’ file a few days later that no references had been checked. Here again, I have got to make up my mind whether I accept Mr John Cannon and his daughter not only as witnesses of truth (that they are goes without saying) but as witnesses whose recollection can safely be relied on. Having seen them in the witness box, I

Page 165 of [1970] 1 All ER 162

am satisfied that they were telling me the truth and that I can rely on their recollection.

I therefore approach the other questions which arise in this case on the basis of these findings: first, Mr John Cannon and his daughter alone saw Trout on the afternoon of 20 August; secondly, Trout produced this green card and a driving licence; thirdly, he did not produce on that occasion any P 45 or national insurance cards; fourthly, he made a favourable impression on Miss Cannon and, so far as Mr John Cannon was capable of forming an impression from the conversation, a favourable impression on him as well; fifthly, the attempted telephone conversation did take place but was abortive; and sixthly, that no reference was in fact taken up on that evening or next day at all. So far as 21 August was concerned, I am satisfied that Trout was asked for his P 45 and his national insurance card and gave the excuse that they were at the labour exchange which could very well have been the truth.

I accept the evidence of all the witnesses that it would be unreasonable to expect an applicant for a job to produce his P 45 or his national insurance cards on the occasion of the initial interview. They are documents which are only produced at the beginning of the employment, if then. They might well have been at the labour exchange, and whatever else may be said against the two Mr Cannons, I am satisfied that they were in no way at fault in not demanding production of the P 45 or the national insurance cards. The same is also true as regards the complaint that they did not demand a photograph. I accept the evidence that for an employer of a potential lorry driver (which is very much a lorry driver’s market) to ask for a photograph would invite the immediate inference that the photograph was being sent straight to Scotland Yard and would frighten off many potential employees. On those findings the case comes down to this: were the plaintiffs, in the light of their obligations to the defendant under the policy (the nature of which I will consider hereafter), guilty of any breach of those obligations affording the defendant a defence to the claim? That is the substance of the defendant’s complaint against them. It is properly conceded that the bacon was lost in transit. The defence is that the plaintiffs were guilty of a breach of their obligations under cl 9 of the policy which, for one reason or another, relieved the defendant from liability from what otherwise would be a valid claim under this policy. I ought to add that most of the complaints against the plaintiffs which were pleaded in either the original or the amended points of defence, such as the plea based on the proposal from and their omission to get Trout to fill up an application form, were either abandoned (as in the case of the proposal form) or not seriously pursued. The fundamental complaint is that the plaintiffs, in the persons of the two Mr Cannons, took no steps whatever to verify this man’s alleged reference; to check up on him, or to take any of the precautions to ascertain his true character such as other witnesses in the road haulage business say is the usual practice in that business. Let me say straight away of those witnesses such as Mr Fisher, who is in a small way of business, Mr Cutter, the manager of Silver Roadways, who is in a very large way of business (both of them admirable witnesses), that I have no hesitation in accepting their evidence as to what the practice of their respective firms is. That is one thing, but the crucial question is whether the plaintiffs were guilty of any breach of their obligations under cl9.

I therefore turn to consider the policy sued on. This policy covers the period 5 April 1968 to 4 April 1969. It is on a standard from, called Lloyd’s Goods in Transit Policy. It begins with a recital against the rubric entitled ‘Contract Clause’. The printed from of the recital has been altered so as to delete from it all references to any proposal form and in its final form reads:

‘Whereas the Insured has applied to the Underwriters for indemnity as hereinafter mentioned and has paid the premium mentioned in Clause 13.’

Then comes cl 2 the the rubric:

‘Cover Clause: The Underwriters agree, subject to the terms, conditions,

Page 166 of [1970] 1 All ER 162

limitations and exceptions contained herein, or endorsed or otherwise expressed hereon, to indemnify the Insured (A) Against the Insured’s legal liability as carrier for loss of or destruction of or damage to goods and/or merchandise in transit [then follows a proviso which is irrelevant for the purposes of the present case but which I will read] Provided that Underwriters’ liability hereunder shall not exceed the legal liability which would attach to the Insured if the contract of carriage entered into by the Insured was subject to the standard Conditions of Carriage for the time being of the Road Haulage Association Limited and/or British Road Services.’

(I need not read sub-paras (B) or (C) because counsel for the plaintiffs agreed that the claim was advanced under and only under sub-para (A). The clause goes on to define ‘In Transit’ thus:

‘“In Transit” means in transit per Insured’s own vehicles to or from any address in the United Kingdom including any loading and unloading and packing and unpacking; and temporary housing in course of transit whether on or off vehicles—limit 72 hours, but extensions held covered at an additional premium to be agreed, subject to prompt advice to Underwriters.’

There then follow two clauses, one marked ‘3. Exclusions Clause’ and one marked ‘4. Radioactive Contamination Exclusion Clause. These are followed in turn by cl 5 marked ‘Non-contribution Clause’, and cl 6 marked ‘Average Clause’ which reads:

‘This Policy is subject to the conditions of average, that is to say, if the property covered by this Insurance shall at the time of any loss be of greater value than the sum insured hereby, the Insured shall only be entitled to recover hereunder such proportion of the said loss as the sum insured by this Policy bears to the total value of the said property.’

Clause 7 is the cancellation clause. Clause 8 is the subrogation clause, and I need read neither. I turn to the all-important cl 9 which bears the rubric ‘Due Diligence Clause’. The clause reads thus:

“The Insured shall take all reasonable precautions for the protection and safeguarding of the goods and/or merchandise and use such protective appliances as may be specified in the Policy and all vehicles and protective devices shall be maintained in good order. Such devices shall be used at all times and shall not be varied or withdrawn without written consent by the Underwriters. It is the duty of the Insured in the event that any property of the Insured, or for which they are responsible, be lost or damaged, to take all reasonable steps to effect its recovery and/or preservation.’

There arise two points for decision. First, what is the true construction of this clause and, secondly, once the true construction has been ascertained, has there been any breach of its terms by the assured which would afford the defendant a defence to the present claim? The first question, to use the language which has been used by counsel in this case, is whether that clause is a condition or a warranty. The use of those two words is not entirely happy because it is well known, particularly in the field of marine insurance law, that the word ‘warranty’ is often used when those who use it in truth mean ‘condition’. I will, therefore, define what I mean in this judgment by a ‘condition’ and a ‘warranty’. By a condition I mean a contractual term of the policy, and breach of which by the assured will in the event of a loss arising otherwise payable under the policy afford underwriters a defence to any claim irrespective of whether there is any causal connection between the breach of the contractual term and the loss. By ‘warranty’ I mean a contractual term of the policy a breach of which will not of itself a defence to underwriters unless there is the necessary

Page 167 of [1970] 1 All ER 162

causal link between the breach and the loss which is the subject of the claim under the policy.

The first question I have to decide is whether this clause is a condition or a warranty. Counsel for the defendant contends, although the contention was not I think very strongly pressed, that this clause is a condition which on its true construction was broken and therefore in any event the defendant has a defence to the present claim. I therefore turn to consider the true construction of this clause in the context in which it appears and against the background of the policy as a whole. This is a standard form and in the cover clause, cl 2, there is a reference in the passage I have already read to ‘terms, conditions, limitations and exceptions’. One naturally, therefore, looks through the policy as a whole to see what clauses can properly be described as conditions apart from cl 9. It seems to me quite plain that cl 3, 4, 5, 6, 7 and 8 are not conditions. The use of the word ‘condition’ in the average clause, cl 6, is not a true use of that word in the sense in which I have defined it. Clause 10, however, is in part at least plainly a condition. If one looks at the definition of the extension of the phrase ‘in transit’ in cl 10(B), one finds in sub-para (3) of that clause:

‘It is a condition precedent to Underwriters’ liability under this Policy in respect of any claim arising out of transit per Sub-Contractors’ vehicles that the property shall not be delivered by the Insured or his servants or agents, and that the Insured shall take all reasonable precautions to ensure that the property is not delivery by the owner or his servants or agents, to any person purporting to be a Sub-Contractor or a representative of a Sub-Contractor unless the bona-fides of the said person shall have been established beyond reasonable doubt.’

I should add that neither cll 11, 12 or 13 are conditions.

Counsel for the defendant argued that unless one construed cl 9 as a condition, there was only one other clause, namely, that part of cl 10 which I have already read, which was susceptible of being construed as a condition. That may be so, but that of itself seems to me to be no reason for forcing on cl 9 a construction which it does not otherwise naturally bear. If one looks at the last sentence of cl 9, which is akin to a sue and labour clause in a policy of marine insurance, that sentence is quite plainly not a condition. There is nothing in cl 9 itself to describe it as a condition, and one is therefore left with being invited to construe this clause as a condition when there is nothing on the face of the clause to suggest that it must of necessity be so construed. I therefore see no reason for construing cl 9 as a condition in the sense in which I have used that term. That point, therefore, fails.

I turn next to consider what I think is perhaps the most difficult point in this case. Construing that clause not a a condition but as a warranty, what does it cover? The defendant says that the words ‘The Insured shall take all reasonable precautions for the protection and safeguarding of the goods and/or merchandise’ are not limited to an obligation to take reasonable steps to preserve what I will call the physical safety of the goods, but extend to cover the taking of all possible reasonable precautions such as taking reasonable steps to see that the assured do not employ dishonest servants, for it is argued that if one is careless about the staff whom one engages when those staff are clearly going to be responsible for the transit and safety of the goods in question, then one is not taking all reasonable precautions for the protection and safeguarding of the goods. That point has force and has been, if I may say so, admirably argued by counsel for the defendant. If those words at the beginning of cl 9 stood alone, the argument would, I think, have great force. But they have to be construed together with the remaining part of the first sentence and indeed with the second sentence as well. If one reads the clause in this way: ‘The Assured shall (a) take all reasonable precautions for the protection and safeguarding of the goods and/or merchandise and (b) use such protective appliances as may be specified in the Policy and (c) all vehicles and protective devices shall be maintained

Page 168 of [1970] 1 All ER 162

in good order. Such devices shall be used at all times and shall not be varied or withdrawn without written consent by the Underwriters’, the question then arises whether those parts of the clause which I have labelled (b) and (c) operate either to cut down or to influence the language of the opening words of the clause which I have already read. Clauses of this kind, although not in this precise language, have from time to time come before the courts in the last 30 years or so. I need not, I think, pause to consider the judgment of Branson J in Concrete Ltd v Attenborough or the judgment of Humphreys J in Pictorial Machinery Ltd v Nicolls. I can go straight to the judgments of the Court of Appeal, consisting of Lord Greene MR and Goddard and du Parcq LJJ in Woolfall & Rimmer Ltd v Moyle. There the relevant words of the clause which was expressly described as a condition were these: ‘The assured shall take reasonable precautions to prevent accidents and to comply with all statutory obligations.' I shall have to return to this case later in this judgment, but counsel for the defendant relied, in support of this part of this argument as to the true construction of the clause, on a passage in the judgment of Lord Greene MR where he said ([1941] 3 All ER at 310, [1942] 1 KB at 75):

‘It seems to me that the language is perfectly satisfied by the taking of such reasonable precautions as … would satisfy a test of reasonableness as between the insured and the underwriters. As I have said, it is eminently reasonable for employers to entrust the tasks to which I have referred to a skilled and trusted foreman on whose competence they have every reason to rely. That being so, I need not go into any matters beyond the actual facts of this case.’

Counsel for the defendant founded his argument on that passage contending that it was clear that the Court of Appeal in that case had in mind that the clause extended to require an assured seeking to comply with that clause to employ, to use Lord Greene MR’s words again, ‘a skilled and trusted foreman’ and that therefore what he claimed were comparable words in the present clause extended to impose on the plaintiffs on obligation to take all reasonable care to select staff. The point is not without difficulty, but I think that there is force in counsel for the plaintiffs’ arguments: first, that this is a clause for the benefit of the defendant and, therefore, if the defendant wishes to say that it is to extend not merely to what I have called physical precautions but is to cover selection of staff, the clause ought so to state in express terms; and, secondly, that if one looks at this clause as a whole, the impression that it leaves to someone reading it is that it is not intended to cover the whole field but is limited to what, on a reasonable reading of the clause, is that which is mentioned in the clause, namely, the need to protect and safeguard the goods and merchandise. The words in the first part of the clause seem to me to be coloured by the later words in the clause and that to extend this clause so as to impose on the assured an obligation to vet their staff with due diligence before they take them on is something which the clause does not cover. If the defendant requires it, he should say so in express terms. He has not said so in express terms and, therefore, for my part I am not prepared to stretch the language of this clause in his favour to give it a meaning which in my judgment it does not naturally bear. One has, of course, great sympathy in this case with underwriters who find themselves again and again faced with claims in cases where the assured or their servants have been grossly negligent in the way that loaded lorries have been left unattended and the like. Equally, in the present case one has great sympathy with the plaintiffs who are a small firm who had the misfortune to employ a dishonest driver. But questions of sympathy do not enter into this, as counsel for the defendant rightly stated, one way or the other. This case has to be determined on the true construction of the clause and on the application of the facts as I find them to that clause properly construed.

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If, therefore, that construction be right, as I believe it to be, it is determinative of this case in favour of the plaintiffs. But I will assume for the remainder of this judgment that that construction was wrong and that the defendant is right in his contention that the obligation extends to taking all reasonable precautions in the selection of staff. The remaining points have been fully and elaborately argued by counsel and it would be wrong in the circumstances if I did not express my views on them. There is a good deal of authority, as I have already mentioned, on this type of clause I have already referred to Woolfall & Rimmer Ltd v Moyle. That case conclusively established that underwriters could not escape liability under this type of clause merely by saying that the assured were vicariously responsible for the negligence of one or more of their servants. The intention and limits of a clause of this kind were authoritatively laid down in the judgment in that case. I quote from the judgment of Lord Greene MR ([1941] 3 All ER at 310, [1942] 1 KB at 75):

‘It seems to me that there is ample scope for the operation of the condition construed in the way in which I would construe it, and, what is more, a scope which gives every reasonable business protection. The fallacy … seems to me to lie in importing into this condition all the matters which are relevant in considering liability based on negligence towards the workman. As between employer and workman … particularly in cases which fall under the Employers’ Liability Act, 1880, the employer can be liable for negligence in law, not only by a personal default of his own, but also by the negligence of a fellow-employee. I see no reason … for importing that conception into the obligation which the insured undertakes towards the underwriters by this condition. It seems to me that the language is perfectly satisfied by the taking of such reasonable precautions as … would satisfy a test of reasonableness as between the insured and the underwriters.’

Then follows the passage which I have already read. Goddard LJ said ([1941] 3 All ER at 311, [1942] 1 KB at 76):

‘… the fallacy which underlies this contention is that we are here construing words in a contract between an underwriter and an insured, and not words in a contract between an employer and employed … [When that is appreciated it becomes] reasonably clear. It is a condition which is put in for the protection of the underwriter … to limit the field of the underwriter’s liability to the extent that he is saying: “I will insure you against the consequences of your negligence, but understand that I am insuring you on the footing that you are not to regard yourself … as free to carry on your business in a reckless manner. You are to take those reasonable precautions to prevent accidents which ordinary business people take. That is to say, you are to run your business in the ordinary way, and not in a way which invites accidents“.’

Pausing there for one moment, in that case Goddard LJ used the word ‘reckless’, and so far as counsel were able to show, that is the first time in this line of cases that the word ‘reckless’ was used. Du Parcq LJ said ([1941] 3 All ER at 312, [1942] 1 KB at 78):

‘In the present case, the insured … says: “I have taken all reasonable precautions. I selected … an admittedly competent and experienced man to choose the materials for the work. I never stinted him or refused any application he made to me for materials … I left the task of selection to him, he being much more fitted to do so than I am myself.” That seems to be a complete and satisfactory answer. Then, however, it is said: “Unfortunately, the competent man whom you employed was on one occasion negligent, and you are vicariously responsible for his negligence, and, as he omitted a reasonable precaution in carrying on your business and in providing for the safety of your workmen …

Page 170 of [1970] 1 All ER 162

you must be said not to have taken a reasonable precaution as between yourself and the insured.” I agree that that argument rests on a complete misconception. The insured never warranted that everybody he employed would take reasonable precautions, or, indeed, that anybody except himself would take reasonable precautions, and he himself has taken reasonable precautions.’

The same question arose again more recently, again in the Court of Appeal, in Fraser v B N Furman (Productions) Ltd (Miller Smith & Partners, Third Parties). I need not refer to the facts of that case. I can go straight to the judgment of Diplock LJ. The learned Lord Justice delivered the leading judgment. He referred to the clause which read ([1967] 3 All ER at 59, [1967] 1 WLR at 905) ‘The insured shall take reasonable precautions to prevent accidents and disease’. He continued ([1967] 3 All ER at 60, 61, [1967] 1 WLR at 905, 906):

‘There are three considerations to be borne in mind on the wording of this condition. (i) It is the insured personally who must take reasonable precautions. Failure by an employee to do so, although the employer might be liable vicariously for the employee’s negligence or breach of statutory duty, would not be a breach of the condition. That was established in, and was the ratio decidendi of, Woolfall & Rimmer, Ltd. v. Moyle and Another. (ii) The obligation of the employer is to take precautions to prevent accidents. This means in my view to take measures to avert dangers which are likely to cause bodily injury to employees. (iii) The third word to be construed in this context is “reasonable“. “The insured shall take reasonable precautions to prevent accidents.” “Reasonable” does not mean reasonable as between the employer and the employee. It means reasonable as between the insured and the insurer having regard to the commercial purpose of the contract, which is inter alia to indemnify the insured against liability for his (the insured’s) personal negligence. That, too, is established by the case that I have cited. Obviously the condition cannot mean that the insured must take measures to avert dangers which he does not himself foresee, although the hypothetical reasonably careful employer would have foreseen them. That would be repugnant to the commercial purpose of the contract, for failure to foresee dangers is one of the commonest grounds of liability in negligence. What in my view is “reasonable” as between the insured and the insurer, without being repugnant to the commercial object of the contract, is that the insured should not deliberately court a danger the existence of which he recognised, by refraining from taking any measures to avert it. Equally the condition cannot mean that, where the insured recognises that there is a danger, the measures which he takes to avert it must be such as the hypothetical reasonable employer, exercising due care and observing all the relevant provisions of the Factories Act, 1961, would have taken. That, too, would be repugnant to the commercial purpose of the contract, for failure to take such measures is another ground of liability in negligence for breach of statutory duty. What in my judgment is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger, should not deliberately court it by taking measures which he himself knows are inadequate to avert it. In other words, it is not enough that the employer’s omission to take any particular precautions to avoid accidents should be negligent; it must be at least reckless, i.e., made with actual recognition by the insured himself that a danger exists, not caring whether or not it is averted. The purpose of the condition is to ensure that the insured will not refrain from taking precautions which he knows ought to be taken because he is covered against loss by the policy. On that construction of the condition, which seems

Page 171 of [1970] 1 All ER 162

to me to be implicit though not expressly stated in some obiter dicta of GODDARD L.J., in Woolfall & Rimmer, Ltd. v. Moyle, I next turn to the facts of this case.’

I read that passage from the judgment of Diplock LJ in full not only because it is the latest authority on this topic and, of course, binds this court, but because counsel for the defendant desired to reserve the right to contend in a higher court (I apprehend in the House of Lords) that the statement of the law by Diplock LJ was wrong and that it is a breach of a clause in the terms of cl 9 or of the clause in the terms of the clause before the court in Fraser v B N Furman (Productions) Ltd, if the assured fails to exercise ordinary care in and about the matter of selecting staff. That argument is not open to him in this court nor, I apprehend, is it open to him in the Court of Appeal.

I, therefore, take the law from that judgment and I proceed to endeavour to apply it. There is no doubt on the evidence that employing a dishonest driver involves serious risk to the safety of the goods carried. That is plainly established by the evidence and, indeed, it is self-evident and hardly needs evidence to establish it. That that risk exists is widely recognised in the road haulage industry of which the plaintiffs are part. Neither of the Mr Cannons sought to deny for one moment that they were aware that if you employ a dishonest driver, you of course imperil the safety of the goods. It is also plain that one way of checking on the trustworthiness of a prospective employee is to take up and check the references from an applicant before you employ him or entrust him with goods. It is clear on the evidence and I have already said that I accept that organisations large and small in the road haulage industry do adopt these precautions and, indeed, it is right to say that in circumstances such as everyone knows exist these are elementary precautions to take. It is also right to say that the plaintiffs normally carried out such precautions. I have already said that on the facts of the present case no reference was obtained although there was one unsuccessful attempt, as I find the facts, to obtain a reference for this man on the telephone. No other steps were taken either to verify his identity or his honesty or to check whether or not he was dishonest.

It therefore seems plain that the plaintiffs in this connection did not follow the usual practice, nor indeed did they follow their own usual practice. Counsel for the defendant asked me, in view of his desire to reserve the question of law, to find as a fact that if the only duty was a duty to take reasonable care, the plaintiffs failed in that duty. I did not understand counsel for the plaintiffs to contend in his reply that the plaintiffs had fulfilled that duty, if their duty were a duty to take ordinary care, no more and no less. Indeed, it is plain that they were, with all respect to them, casual. One can understand this and one can sympathise with it. They had lorries which were idle for want of employees and they were desperately anxious to get somebody as quickly as possible for they had work for him ready to hand at 5.00 or 6.00 am the following day. All that one can understand. It may be that it was that pressure, perhaps of economic necessity, which led them to act on a judgment formed at the interview, a judgment confirmed by Mr George Cannon when he saw the man for the first time about 6.00 am on 21 August, instead of going more cautiously about the matter and taking up and verifying the references. But to make that finding is very different from saying that the plaintiffs are in breach of cl 9, assuming that it bears the construction for which the defendant contends and which I have already rejected. I have to ask myself the same question as Diplock LJ asked. It is not enough that the employer’s omission to take a particular precaution to avoid accident should be negligent. It must at least be reckless, that is to say, made—

‘with actual recognition by the insured himself that a danger exists, not caring whether or not it is averted. The purpose of the condition is to ensure that the

Page 172 of [1970] 1 All ER 162

insured will not … refrain from taking the precautions which he knows ought to be taken because he is covered against loss by the policy.’

It is plain that the plaintiffs in the person of the two Mr Cannons were well aware that the danger existed, but to say that they did not care whether or not it was averted is a very different matter. Having seen them, I have not the slightest doubt that they cared deeply about it. They are carriers of repute. The last thing in the world they would have wanted would have been wittingly to have taken on a dishonest employee, and to suggest that they refrained on this occasion from taking the normal precautions because they knew that they were covered against loss by the policy would be to impute to them a thought which I am certain never for one moment entered into their heads.

It seems to me, therefore, that applying that test enunciated by Diplock LJ, the defendant has failed to show that the plaintiffs were reckless, and even if, therefore, I had accepted counsel for the defendant’s suggested construction of the opening words of the clause, I should still have decided this case in the plaintiff’s favour on the ground that it has not been shown that they were reckless in the way they acted even though they neglected to take reasonable precautions.

There only remains one other point which does not strictly arise for decision but with which I ought to deal since the point was strenuously argued. If I am wrong and there was a breach of this clause sounding in damages, did this loss flow from the breach of cl 9? The argument for the plaintiffs is that what caused the loss was the dishonesty of Trout and not the failure of the plaintiffs to take the precautions to which I have already referred. The argument for the defendant is that if one looks at this as a matter of common sense, on the facts of this case the man in the street would say ‘Well, if they had taken reasonable precautions, of course, they would not have got a dishonest driver on their hands and, of course, this loss would not have resulted’. Counsel for the defendant relied on a recent decision of the Court of Appeal in John Carter (Fine Worsteds) Ltd v Hanson Haulage (Leeds) Ltd. I agree with counsel for the defendant when he submitted that the judgments in this case have to be approached with a certain amount, if I may use the word without disrespect, of caution, since the views expressed by the learned Lords Justices on the question of fundamental breach were expressed before the subsequent decision of the House of Lords in Suisse Atlantique Société d’ Armement Maritime SA v NV Rotterdamsche Kolen Centrale. The point at issue was whether the hauliers, by failing to take up a reference of an employee who proved subsequently to be dishonest, committed what in the legal phraseology of the time was called a fundamental breach thereby depriving themselves of the right to rely on a clause limiting their liability to £50 per gross hundredweight and pro rata for any part of a hundredweight of the goods so lost or damaged. It is plain when one reads both the dissenting judgment of Sellers LJ and the majority judgments of Davies and Russell LJJ, that all the learned Lords Justices thought on the facts of that case that there was the necessary causal link between the alleged breach of contract and the loss. Sellers LJ in the dissenting judgment said ([1965] 1 All ER at 120, [1965] 2 QB at 519):

‘I think that the judge held and was entitled to hold that the defendants’ negligence in employing Gordon without a reference or further inquiry into the matters he put before them was the cause of the loss.’

Davies LJ said [[1965] 1 All ER at 125, [1965] 2 QB at 527]:

‘The real difficulty on this question of causation arises from the fact that the matter was never investigated in the court below; but, if one looks at it broadly, the right conclusion, in my judgment, is that it is reasonably probable that if

Page 173 of [1970] 1 All ER 162

some inquiries had been made in an attempt to check Gordon’s account of his career, something would have emerged which would have prevented the defendants from employing him or at least would have prevented them from putting him in such a position of trust as to enable him to steal the goods. The failure to make inquiries and the resultant opportunity unwittingly offered by the defendants to Gordon to steal the goods were therefore a cause of the loss.’

It will be noted that the learned Lord Justice uses the phrase ‘a cause of the loss’ and not ‘the cause of the loss’. Russell LJ said ([1965] 1 All ER at 127, [1965] 2 QB at 531):

‘Nor ultimately was it, I think, argued with great persistence that the loss by theft would have occurred even if the carrier’s agent had taken steps to check the driver’s references.’

I take the law on this issue from the speech of Lord Macmillan in Yorkshire Dale Steamship Co Ltd v Minister of War Transport, The Coxwold. Lord Macmillan dealing with a question of causation in a case which arose during the last war on the fc and s clause in its then form, said ([1942] 2 All ER at 11, 12, [1942] AC at 702, 703).

‘No formula can be devised which will provide a universal touchstone for the infinite variety of circumstances which may arise. Each case must be judged in the light of its own facts and by resorting, not to the refinements of the philosophical doctrine of causation, but to the commonplace tests which the ordinary business man conversant with such matters would adopt. It is agreed that the Coxwold when she ran aground on the coast of Skye was engaged in a warlike operation; but in order to place liability on the minister [in parenthesis I would add that the respondent Minister was the war risk underwriter], it is not enough that the casualty arose in the course of a warlike operation. It must also arise out of and be proximately caused by the warlike operation. The stranding of a ship is a typical marine casualty, but that does not prevent it from being proximately caused by warlike operations … I think that the ordinary man, if asked what caused the casualty, would reply that it was caused by the vessel, in obedience to orders from the commodore of the convoy, deviating from a safe course in order to avoid a suspected enemy submarine. It is true that there was an unexpected tidal set which contributed to carry the vessel to the eastward, but there is no finding that this tidal set would have caused the stranding apart from the change of course.’

If I may respectfully borrow Lord Macmillan’s language, I would seek to solve this problem by reference to the commonplace test which the ordinary businessman conversant in such matters would adopt. I think that if you asked the ordinary businessman what caused the loss here, he would not reply ‘Theft by the bogus Trout and no more’; he would reply ‘Well, the plaintiffs never took up his references: had they done so, this loss would not have occurred; that was the cause of the loss’.

Accordingly, had that point been relevant, I would have resolved it in the defendants favour, but for the reasons I have given earlier, I hold that the plaintiffs are entitled to indemnity under this cover and accordingly there will be judgment for a declaration as to the form of which I will hear counsel.

Declaration accordingly.

Solicitors: Collyer-Bristow & Co (for the plaintiffs); Charles Gladitz & Co (for the defendant).

E H Hunter Esq   Barrister.

Bromilow & Edwards Ltd v Inland Revenue Commissioners

[1970] 1 All ER 174

Categories:        TAXATION; Assessment; Corporation Tax        

Court:        COURT OF APPEAL, CIVIL DIVISION        

Lord(s):        RUSSELL, SALMON AND MEGAW LJJ        

Hearing Date(s):        9, 10 NOVEMBER 1969        

Income tax – Corporation tax – Schedule F – Transitional provisions – Liability for excess over standard amount – Excessive dividends in 1965–66 – Treatment as paid on 6 April 1966 – Certificate of exemption – Whether a main purpose to avoid or reduce tax liability – Directors’ knowledge of effect of provisions – Finance Act 1965, s 83(1), (11).

During its financial year ending on 31 March 1966, the taxpayer company paid two dividends amounting in all to 25 per cent on its share capital, and on the pattern of previous years would not have paid the next dividend until some months after the end of that year. However, on 31 March 1966 it paid a further dividend of 15 per cent, amounting to £170,000, making 40 per cent in all for that year. In the ensuing year 1966–67 it paid one dividend of 10 per cent. The additional dividend paid in March 1966 brought the gross dividends paid in the tax year 1965–66 to a sum greater than the standard amount prescribed under s 83(1) of the Finance Act 1965, and the excess of £140,192 fell to be brought into account under ss 47(3) and 48 ‘as if it were the gross amount of dividends’ paid on 6 April 1966, and accordingly subject to Sch F tax operating as from that date under the Act. The taxpayer company applied to the Commissioners of Inland Revenue for a certificate under s 83(11)a of the Act that it was entitled to exemption from those provisions on the ground that ‘it was not the company’s main purpose or one of its main purposes in paying that excess to avoid or reduce a liability under s 47(3)’ of the Act. On appeal against the commissioners’ refusal to certify that the taxpayer company was entitled to the exemption, the Special Commissioner of Income Tax found that the directors of the taxpayer company were well aware that, if they paid the £170,000 after 5 April 1966 instead of before it, it would attract some £70,000 Sch F tax, and that it was to avoid that that they paid the dividend before that date, and that they were also aware that a dividend of that size would result in an excess for s 83 purposes, but that they did not concern themselves with that. The commissioners held that the taxpayer company had failed to show that one of its main purposes was not to avoid or reduce a liability under the Act and upheld the refusal of a certificate.

Held – The decision of the Special Commissioners would be affirmed because on the plain language of s 83(11) the purpose of the taxpayer company in paying the £170,000 dividend in March 1966 was to avoid or reduce a liability under s 47(3) ‘in respect of dividends paid after that year’ (ie 1965–66), the result of any contrary implication from those words (the dividend not being paid after that year) being to stultify the whole section and the purpose of the excess being the purpose of the whole of the March dividend, including the excess (notwithstanding the finding that the directors did not concern themselves with the resulting excess under s 83) although the excess was produced by that and also two earlier dividends in 1965–66 (see p 178, d and f, and p 179, a, d and f, post).

Decision of Megarry J [1969] 3 All ER 536 affirmed.

Notes

For treatment of dividend increases in 1965–66 for corporation tax purposes, see Supplement to 20 Halsbury’s Laws (3rd Edn) para 2049.

Page 175 of [1970] 1 All ER 174

For the Finance Act 1965, s 83, see 45 Halsbury’s Statutes (2nd Edn) 628.

Case referred to in judgments

Inland Revenue Comrs v Ayrshire Employers Mutual Insurance Association Ltd [1946] 1 All ER 637, 175 LT 22, 27 Tax Cas 331, 28 Digest (Repl) 85, 322.

Appeal

The taxpayer company, Bromilow & Edwards Ltd, appealed to the Special Commissioners of Income Tax against the refusal of the Commissioners of Inland Revenue to certify that the company was entitled to exemption from treatment of the excess of its dividends paid in 1965–66 over the standard amount prescribed as having been paid on 6 April 1966 under s 83(11) of the Finance Act 1965. The question for determination was whether the taxpayer company was entitled to a certificate of exemption under s 83(11) according to the true meaning and effect of the language of that subsection. Section 83(11) provided:

‘Where a company has in the year 1965–66 paid a gross amount in dividends greater than the standard amount, it may, not later than two years after the end of that year, apply to the Board to be exempted from the foregoing provisions of this section, and if the company shows that it was not the company’s main purpose or one of its main purposes in paying that excess to avoid or reduce a liability under section 47(3) of this Act in respect of dividends paid after that year, the Board shall certify that the company is entitled to exemption under this subsection, and subsection (1) above shall then not apply to the company.’

The following facts were found. Before 1962, the taxpayer company made up its accounts to 30 November in each year, and in 1962 the accounting date was altered to 31 March. Consequently the accounts for 1963 reflected a 16-month period, while the subsequent accounts reflected a 12-month period ending (in each year) on 31 March. The company had held its annual general meeting in August or September in each year. Over the period from April 1962 to January 1968 it had paid the following dividends:

               Rate

Per

cent        Date paid        Gross £        Net £        Date of Annual General Meeting Approving Final Dividend        

(1)        Final        9        11.4.62        76,500        46,856        9.4.62        

(2)        1st Interim        6        31.10.62        56,666        34,708                

(3)        2nd Interim        9        19.4.63        85,000        52,062                

(4)        Final        6        12.9.63        56,666        34,708        10.9.63        

(5)        Interim        6        7.4.64        68,000        41,650                

(6)        Final        11½        24.9.64        130,333        79,829        22.9.64        

(7)        Interim        10        28.1.65        113,333        69,416                

(8)        Final        15        26.8.65        170,000        99,875        24.8.65        

(9)        Interim        10        28.1.66        113,333        66,583                

(10)        2nd Interim        15        31.3.66        170,000        99,875        29.7.66        

(11)        Interim        10        27.1.67        113,333        66,583                

(12)        Final        15        13.9.67        170,000        99,875        12.9.67        

(13)        Interim        10        26.1.68        113,333        66,583                

Dividends numbered (2), (3) and (4), were paid in respect of the taxpayer company’s accounting period of 16 months ended 31 March 1963 and together totalled 21 per cent. Dividends numbered (5) and (6) were paid in respect of the year ended 31

Page 176 of [1970] 1 All ER 174

March 1964 and together totalled 17 1/2 per cent. Dividends numbered (7) and (8) were paid in respect of the year ended 31 March 1965 and together totalled 25 per cent. Dividends numbered (9) and (10) were paid in respect of the year ended 31 March 1966 and together totalled 25 per cent. No final dividend was paid for that year. Dividends numbered (11) and (12) were paid in respect of the year ended 31 March 1967 and together totalled 25 per cent. Dividend numbered (13) was an interim dividend in respect of the year ended 31 March 1968. Section 47 of the Finance Act 1965 charged income tax, Sch F, in respect of all dividends paid by (inter alia) the taxpayer company in any year of assessment after 1965–66, ie in 1966–67 or subsequent years. In consequence, and dividend paid by the taxpayer company after 5 April 1966 gave rise to a charge to income tax, and the company was obliged to account for and pay such tax under s 47(3). The taxpayer company had so accounted for and paid such tax in respect of the dividends numbered (11), (12) and (13). Section 83(1) of the Act of 1965 operated in respect of dividends paid by the taxpayer company in the year 1965–66 and provided that the excess of such dividends over a standard amount should be brought into account under s 47 as if it were the gross amount of dividends paid on 6 April 1966. The dividends paid by the taxpayer company in 1965–66 which were material for the purpose of s 83(1) were dividends numbered (8), (9) and (10), ie the final dividend for the year ended 31 March 1965, paid on 26 August 1965; the interim dividend for the year ended 31 March 1966, paid on 28 January 1966; the second interim dividend for the year ended 31 March 1966, paid on 31 March 1966. Those three dividends totalled 40 per cent; they resulted in an excess for the purpose of s 83 of £140,192. At a board meeting of the taxpayer company’s directors held on 11 March 1966, where it was agreed that the second interim dividend for the year ending 31 March 1966 should be paid, the directors had before them up-to-date figures indicating what the results of the accounting year were likely to be, and they wished to make a total distribution for the year of 25 per cent, as in the previous year. An interim dividend of 10 per cent having already been paid, a further distribution of 15 per cent would be required. They were aware that if the payment of a further dividend were left to the annual meeting (to be held in the summer) it would attract Sch F tax in the region of £70,000 (although the figure had not been exactly calculated) and to avoid that they decided to pay a second interim dividend of 15 per cent before 5 April. They were also aware that a dividend of that size would result in an excess for s 53 purposes, but they did not concern themselves with that. At the same board meeting it was decided that a statement in the following terms should be issued to the Stock Exchange and to shareholders:

‘In view of the provisions of the Finance Act, 1965, your board has decided to declare a second Interim Dividend for the year to 31st March, 1966, to take place of a final dividend which would normally be payable immediately after the Annual General Meeting. This dividend of 15% less Income Tax will be paid on 31st March, 1966, making a total distribution of 25%, less Income Tax, for the year. This is equal to the total dividend distributions for the previous year, and there will be no final dividend for this year. Although sales for the current year are slightly higher than for the previous year, the profit before tax for the ten months trading to January, 1966, is approximately 12 1/2% down. This is partly because it has not been possible wholly to absorb rising costs and a greater proportion of our sales for this year has been for the export market, where our profit margins are small. 30thMarch, 1966.’

It was contended on behalf of the taxpayer company that: (i) it was not the taxpayer company’s main purpose or one of its main purposes in paying the excess to avoid or reduce a liability under s 47(3) in respect of dividends paid after 1965–66; (ii) as the directors were aware that the payment of a dividend in the year 1965–66 could in no way affect the taxpayer company’s liability under s 47(3) ‘in respect of dividends paid after that year’, it was not permissible to infer that it was the taxpayer company’s

Page 177 of [1970] 1 All ER 174

main purpose or one of its main purposes in paying the excess to avoid or reduce such a liability; (iii) alternatively, the mind of the taxpayer company had not been directed to the payment of an ‘excess’ of some £140,000, and the only purpose of the directors in paying the second interim dividend of £170,000 had been to maintain for the year ended 31 March 1966, and with the benefit of the 1965–66 law, the same rate of dividend as previously; and accordingly (iv) the taxpayer company was entitled to a certificate of exemption. It was contended on behalf of the Crown that the taxpayer company had not shown that its main purpose or one of its main purposes in paying the excess was not to avoid or reduce a liability under s 47(3) in respect of dividends paid after 1965–66, and that the certificate of exemption should be refused

The commissioners decided as follows:

‘… 2. It was suggested that the [taxpayer] company had no purpose at all related to the excess, and that its only purpose or purposes related to the payment of the dividends themselves (which involved a sum different from the excess). We think however that the company’s purpose in paying the excess must be the same as its purpose in paying the dividends which resulted in the excess, and accordingly we must examine its purpose or purposes in paying the dividends. 3. The purpose in paying the first two dividends was not in question. The [taxpayer] company’s purposes in paying the third (i.e., the second interim dividend for the company’s year to 31st March, 1966, paid on 31st March, 1966) were (1) to pay what was intended to be a second and last dividend for the company’s year ending on that date, and (2) to pay it before the beginning of the year 1966–67, instead of following its normal practice of waiting until the Annual General Meeting which would be held later, in order to take advantage of the fact that Section 47(3) of the Finance Act, 1965, did not apply to distributions made before 1966/67. The reason why there was an excess was that the payment of this dividend was accelerated, and it was accelerated in order to avoid a liability which would have arisen under Section 47(3) if it had been paid later. 4. It was contended on behalf of the [taxpayer] company that it did not have any purpose of avoiding a liability under Section 47(3) in respect of any dividend which it might pay after 1965/66; the directors would be aware that such liability in respect of such dividend would be unavoidable. We do not read the words in Section 83(11) “a Liability … in respect of dividends paid after” as referring to a liability in respect of particular dividends which might be paid after, but rather as referring to what one might loosely call “Section 47(3) liability“. The [taxpayer] company has paid dividends after 1965/66 and has presumably incurred a liability under Section 47(3) in respect thereof; if it had not accelerated the payment of the second interim, it would have incurred a greater total liability, and we find (and so far as it is a matter of law, we hold) that the [taxpayer] company has failed to show that it was not one of its main purposes in paying the excess to avoid or reduce a liability under Section 47(3) in respect of dividends paid after 1965/66. Accordingly we uphold the Board’s refusal of a certificate of exemption.’

The taxpayer company appealed by way of case stated to the High Court. The question of law for the opinion of the court was whether, in arriving at their decision, the Special Commissioners had correctly applied the language of s 83(11) of the 1965 Act to the facts of the case. On 25 March 1969, as reported at [1969] 3 All ER 536, Megarry J dismissed the taxpayer company’s appeal by way of case stated against the Special Commissioners’ decision, holding that the purpose or main purpose of paying the dividend of £170,000 on 31 March 1966 was to reduce the liability for Sch F tax that there would be in respect of dividends paid after 5 April 1966. The taxpayer company appealed to the Court of Appeal.

Heyworth Talbot QC, Peter Rees QC and T F North for the taxpayer company.

Hubert H Monroe QC and P W Medd for the Crown.

10 November 1969. The following judgments were delivered.

Page 178 of [1970] 1 All ER 174

RUSSELL LJ. I do not propose to detail the circumstances of this case, which are published in the report of the case below before Megarry J ([1969] 3 All ER 536, [1969] 1 WLR 1180). The first point that the taxpayer company takes is that since it is impossible in law, if a dividend is paid after 5 April 1966, for a company to avoid or reduce a liability under s 47(3) of the Finance Act 1965 in respect of that dividend, then the taxpayer company cannot, when it accelerated the final dividend of £170,000 by a declaration shortly before 5 April 1966 by the board of a second interim dividend of that amount, have had the purpose of achieving that impossibility.

The argument involves, as I see it, the proposition that the whole of s 83 was stillborn. Of course, I bear in mind that this has happened before to a child of fiscal legislation, even though its features were recognisable (see Inland Revenue Comrs v Ayrshire Employers Mutual Insurance Association Ltd in which a taxing section misfired in fact because the legislature misunderstood the existing law). I cannot accept that argument for a moment. It is quite a common occurrence that the intention of an enactment can be expressed with sufficient clarity in more than one way. The directors here paid a dividend involving an excess of £140,000, over the standard amount, and they paid this dividend that was due in the ordinary course of events to be paid in 1966–67 in order to avoid paying it in 1966–67 because, had it been paid in 1966–67, it would have attracted liability under s 47(3). It seems to me, with great respect to the argument, that on the plain language of the section their purpose in paying was to avoid or reduce a liability under s 47(3) in respect of dividends paid in 1966–67.

It was accepted in argument, at least by one of the counsel appearing for the taxpayer company, that if the phrase had been merely ‘avoid or reduce a liability under section 47(3) of this Act’ and had not gone on to say ‘in respect of dividends paid after that year’, the argument of the taxpayer company under this head could not stand up. Nor, it seems to me, could it stand up had the phrase only been ‘liability under section 47(3) of this Act in respect of dividends’. But the only liability under s 47(3) is, so far as relevant to a question of payment of excess dividends, in respect of dividends and in respect of dividends paid after the particular year. In my view, the added words are no more than descriptive of that liability imposed by s 47(3) that could be related to an excess distribution by way of dividends; to insist that in principle some result must be achieved by them and that the only result that can be achieved by them is to stultify the whole section is, in my view, to carry general approaches to questions of construction to a point of absurdity.

It was suggested that a meaning could be attributed to those words that would not wholly stultify the operation of s 83, or rather would not make it possible to say that the burden under s 83(11) was successfully discharged in every case. It was suggested that a case might be covered in which a company in general meeting in March 1966 declared a dividend to be paid in June, and the directors then finding that it would be caught by s 47(3) if paid in June, decided to hasten on the payment and pay before 6 April. It is said: ‘Now, the would be a case in which s 83 would operate, and without s 83(11) necessarily excusing the company.’

I cannot see that that is a valid argument, any more than it would be if the board of directors decided to distribute an interim dividend just inside the year 1966–67 and then, on being told that they would get into trouble with this new taxation system if they did that, resolved to cancel the declaration of the interim dividend and substitute one accelerated. It seems to me that, if the point that the taxpayer company takes is a sound point, then it can only be on the basis that the whole of the section in all cases must be stultified.

Then it was said as an alternative that, although the directors were aware that the dividend of £170,000 involved an excess of £140,000—and I quote from the stated

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case—‘they did not concern themselves with that’. It was said on the basis of that that they could not have had the relevant main purpose ‘in paying that excess’. I take the view, with I think the Special Commissioners, that the short answer to that is that, if the main purpose in regard to the whole of the £170,000 dividend was to avoid or reduce a liability under s 47(3), then that main purpose must apply to the whole of that dividend, including the excess. Both the Special Commissioners and the learned judge ([1969] 3 All ER at 544, [1969] 1 WLR at 1191) on this question of excess remarked that the excess of £140,000, if one looked at the language of the measuring section, was in one sense a part of the whole of the three dividends that were paid in the year 1965–66—a final of 170,000 in August 1965, an interim of £113,000 in January 1966 and this second interim on 31 March 1966, of £170,000. It is said, if that be so, it is quite plain that the taxpayer company had (to use a general phrase) no tax avoidance purpose in connection with the dividends no (8) and no (9) in August 1965 and January 1966. Therefore, since the excess of £140,000 over the whole year must be attributed in part to all three of those dividends and since—and I entirely accept this—the Special Commissioners found no relevant main purpose in relation to those two dividends, the Crown failed because one cannot attribute to any one of those dividends any tax avoidance purpose.

I think that the correct approach in construing s 83(11) is and must be that one is considering there the purpose in making payments, and when one is considering the purpose in making payments involving an excess, one must look at the dividend or dividends that in fact produce as a result of their payment the relevant excess figure; just as—and I am indebted to Megaw LJ for this example—if one has a 4 1/2-gallon tank and one pours in four gallons and then one pours in a fifth gallon and it overflows, the overflowing, the excess, is properly to be attributed to the fifth and last gallon. For those reasons, in my judgment, this appeal fails and should be dismissed.

SALMON LJ. Interesting as I have found the arguments addressed to us and much as I appreciate their ingenuity, I find myself so wholly in agreement with what has fallen from Russell LJ and with the decision of the Special Commissioners and the judgment of the learned judge ([1969] 3 All ER 536, [1969] 1 WLR 1180) that there is nothing that I can usefully add.

MEGAW LJ. I also agree.

Appeal dismissed. Leave to appeal to the House of Lords refused.

Solicitors: Hextall, Erskine & Co, agents for Laces & Co, Liverpool (for the taxpayer company); Solicitor of Inland Revenue.

F A Amies Esq   Barrister.

Hawkins v Ian Ross (Castings) Ltd

[1970] 1 All ER 180

Categories:        HEALTH; Health and safety at work; TORTS; Negligence        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        FISHER J        

Hearing Date(s):        12, 13 JUNE 1969        

Factory – Gangways and pouring aisles – Sufficient and clearly defined pouring aisle – ‘Sufficient’ – Iron and Steel Foundries Regulations 1953 (SI 1953 No 1464), reg 6(2)(a).

Factory – Gangways and pouring aisles – Sufficient and clearly defined pouring aisle – ‘Clearly defined’ – Iron and Steel Foundries Regulations 1953 (SI 1953 No 1464), reg 6(2)(a).

Factory – Gangways and pouring aisles – Sufficient and clearly defined pouring aisle – Obstruction – Iron and Steel Foundries Regulations 1953 (SI 1953 No 1464), reg 6(2)(a).

Master and servant – Duty of master – Untrained foreign labourer with poor knowledge of English – Labourer employed to carry molten metal – Standard of care – Iron and Steel Foundries Regulations 1953 (SI 1953 No 1464), reg 6 (2)(a).

Negligence – Contributory negligence – Employers in breach of Iron and Steel Foundries Regulations 1953 – Employee prepared mould for casting with handle obstructing pouring aisle – Stumbled over handle and suffered injury – Whether just or equitable to reduce his damages – Law Reform (Contributory Negligence) Act 1945, s 1.

The plaintiff and two other men worked in one bay in the defendants’ foundry preparing moulds for castings. A quantity of equipment including stacks of moulding boxes and piles of sand was kept in the bay. It was admitted by the defendants that when three men were working there the boxes should have been stored elsewhere. There were no pouring aisles marked out in the bay. On the day in question, the plaintiff had prepared the moulds he was required to do in a line from the front to the back of the bay leaving a space for a pouring aisle to one side between the moulds and some stacked moulding boxes. At 3.00 pm he was told to prepare another mould. There was barely room for it at the end of the line of prepared moulds because a pile of sand was in the way. The plaintiff did not protest to the foreman but cleared the sand a little and put the mould in as best he could but it was out of line and there were only about 12 inches between the handle of the mould and those of the pile of moulding boxes. The molten metal for pouring into the moulds was carried in a hand shank with handles at each end 19 inches apart. The plaintiff took one end of the shank and S, a 17-year old Indian, an untrained labourer who spoke indifferent English, took the other. The plaintiff proceeded backwards down the pouring aisle with S walking forward. The plaintiff felt his ankle touch the handle of the last moulding box and shouted to S to stop, but S continued to walk forwards, the plaintiff lost his balance and fell over the mould. The molten metal was spilt and some of it went on his foot. He brought an action against the defendants, alleging, inter alia, vicarious liability on their part for the negligence of S and breach of statutory duty.

Held – (i) The accident was wholly caused by the breach of statutory duty imposed on the defendants by reg 6(2)(a)a of the Iron and Steel Foundries Regulations 1953, because—

(a) the defendants had taken no steps to define or maintain pouring aisles (see p 187 e, post);

(b) their duty was not discharged by leaving to the skilled and experienced moulders the responsibility of leaving sufficient space around the moulds according to the volume of work to be done from day to day (see p 187 c, post);

Page 181 of [1970] 1 All ER 180

(c) even if the pouring aisle between the plaintiff’s moulds and the pile of moulding boxes had been of the statutory minimum width of 18 inches, it would not necessarily have complied with the requirements of reg 6(2)(a) (eg had moulding boxes been stacked to a height of 3 or 4 feet—hand level) since the handles of the hand shank were 19 inches apart (see p 187 f and g, post);

(d) the defendants should either have refrained from ordering the plaintiff to make the last mould or provided labourers to clear the area so that the handles of the box did not obstruct the pouring aisle (see p 187 j, post);

(e) the fact that an unskilled labourer such as S with an imperfect knowledge of English was employed to carry molten metal imposed a higher standard of care on the defendants both in the layout of the work and in the steps to be taken to avoid accidents (see p 186 d, post).

(ii) Alternatively, if there were contributory negligence on the part of the plaintiff, it was not just or equitable, applying s 1 of the Law Reform (Contributory Negligence) Act 1945, to reduce the damages having regard to the plaintiff’s share in the responsibility for the damage (see p 188 f, post).

Notes

For the liability of an employer for breach of statutory duty, see 25 Halsbury’s Laws (3rd Edn) 507, para 972.

For the Law Reform (Contributory Negligence) Act 1945, s 1, see 17 Halsbury’s Statutes (2nd Edn) 12.

For the Iron and Steel Foundries Regulations 1953, reg 6, see 8 Halsbury’s Statutory Instruments (First Re-issue) 217.

Action

This was an action by the plaintiff, Frederick William Hawkins, for damages for personal injuries against his employers, Ian Ross (Castings) Ltd, the defendants. The facts are set out in the judgment.

K M McHale for the plaintiff.

J F A Archer for the defendants.

13 June 1969. The following judgment was delivered.

FISHER J. Mr Hawkins, the plaintiff, had the misfortune to suffer a painful injury on 16 November 1967 when he was employed as a moulder by the defendants, Ian Ross (Castings) Ltd, in a foundry at their factory at Bestobel Road, Slough, in Buckinghamshire. At the time of the accident he was carrying one end of a two-handled shank containing molten iron, when he slipped and fell, and molten metal went over his left foot.

The accident happened in a comparatively new part of this foundry which had been in use for some five years. I was told that there had been a single moulding bay of this type in the old factory but that five years ago this new bay was built and the work transferred to it and other work carried on in the old bay.

The area with which I am concerned is an area 45 feet long and 161/2 feet deep. Along the 45 foot frontage runs a main gangway and the 161/2 foot dimension runs away from that gangway to the back wall, which appears to be brick with corrugated iron above. At the left-hand end of the area, as one looks at it from across the gangway, there is a door which is used as a means of ingress and egress by workmen, and there are two furnaces at that end; so that the working area is, to some extent, curtailed at that end. Apart from that, it is substantially the same size as the working area had been in the old bay, and I was told that there is a working area of comparable size on the other side of the main gangway. The kind of work which is done

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in this area is the preparation of moulds for castings. The floor of the area is made of concrete, but there is a light covering of sand over it to prevent splashes from spilt hot metal.

The moulds are made in this way: a number of wooden boxes—two or more—are placed on top of each other to form what has been called a ‘sandwich’. A pattern is placed in the box and, maybe, a core also, and sand is rammed around. Then, as the final item, hot metal is poured in through a hole in the top to form the casting required. I may not have got the sequence of operations exactly right, but, for present purposes, I do not think that it matters. The important features for the present purposes are that the moulds consist of a box, or boxes, placed on top of each other, and the final process is the pouring of hot metal. The castings differ in size and, consequently, the moulding boxes themselves differ in size, and I have heard in this case of boxes 2 feet X 2 feet and a box 3 feet X 1 foot and plainly there are boxes which are smaller than that and, although I do not think they arise in this case, boxes which are larger. The height of a mould, consisting of two boxes placed one on top of the other, would be about 10 inches. The normal course of the work is that the plaintiff and the other moulders will be told, either the evening before or at the beginning of the day’s work, what moulds they are required to make during the day, and they will then set out their work accordingly and carry it out. Having made the moulds, they pour the hot metal and then, when they have gone off work, the moulds are undone by labourers.

The evidence is that in the area of 45 feet X 16 feet, which I have spoken of, there were sometimes two men working and sometimes three men working, and it seems to me from the evidence that there were more usually two men, but that there had been periods of many weeks when there were three men working, and that the reason for only having two at times was the difficulty of obtaining moulders. Shortly before the accident to the plaintiff, there had been two men working in the area, Mr Thomas and Mr Bartlett. Mr Thomas had then gone off sick, leaving Mr Bartlett on his own. The plaintiff had worked for the defendants since 1965 as a core maker, but about three weeks before the accident he was put on to moulding and he came and worked in the area concerned with Mr Bartlett, Mr Thomas being away sick. Three days before the accident, Mr Thomas came back and so there were three of them. Looking at the area from across the gangway and towards the back wall, they worked in the order Mr Thomas on the left, the plaintiff in the middle, and Mr Bartlett on the right.

Now, one of the problems of a work area like this is the disposal, or storage, of the material which is needed for the work. The patterns are no problem, since they are brought when required and then, after use, taken back to the pattern store. There are numerous smaller items, shovels, shanks, clamps, nuts and bolts, tubes and so on, all of which have to be stored somewhere reasonably convenient to the working area, but, being small items, they do not present any particular problem. However, the moulding boxes do present a problem. They are bulky items; they take up a good deal of space, and some steps have to be taken to see to their storage. I am satisfied that what was done was this, that at the times when there were only two men making moulds in this particular area, the centre part of the area—that part where the plaintiff ultimately came to work—was used, and quite properly used, for the stacking and storage of moulding boxes. It seems to me to be common sense, and perfectly good practice, to store these moulding boxes as close as possible to the place where they are going to be needed for work, because I was told that the sizes and types of moulding varied from day to day and nobody would be able to tell for certain which moulds would be needed, apart from the knowledge that they would gain from being told the nature of their next day’s work. Until then, they would not know which moulds they were going to need; and I am quite sure that, again, human nature being what it is, the moulders themselves would want to have the moulding boxes as close to their place of work as possible.

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I have described the situation as I believe that it was when there were only two men working in this area. However, when there were three men working there of course the centre part of the working area was no longer available for the storage of boxes and Mr Marshalsea, who was the defendants’ works manager, and Mr Thompson, who was the foreman, both said that, from time to time, they would be asked by the moulders to get labourers to move boxes out of the way and on occasion they themselves would of their own volition have boxes moved out into the yard. But Mr Marshalsea said that there were occasions when he was asked to have boxes moved and, either because of shortage of labourers or because they were needed for more urgent jobs, or because they did not do the work they were supposed to do, boxes were not moved, or not immediately moved, after such a request. Mr Marshalsea accepted that with three moulders, surplus boxes should have been put in the yard, whether they were likely to be wanted for use shortly or not. He was not able to say whether or not this had been done on the day of the plaintiff’s accident; nor was Mr Thompson.

The plaintiff and his witnesses all said, and I accept that this is the case, that in fact a considerable number of moulding boxes, and other articles, despite the fact that there were three men working on the site in the area, were kept stacked in the working area, and they were stacked, as I find, between Mr Thomas’s working area and the plaintiff’s working area on the one side, and between the plaintiff’s working area and Mr Bartlett’s working area on the other side. Although the evidence was that they were stacked reasonably tightly, and, of course, they can be stacked one upon the other to a height of perhaps 3 or 4 feet, I am satisfied that they were not in regimental straight lines or anything of that kind. Their presence did, I am satisfied, substantially reduce the available working area.

Another matter which reduced the available working area was that there were necessarily at the back, against the wall, piles of sand, sand which the workmen were going to have to use in making their moulds. The size of the pile of sand would diminish as the day went on, as the order of events was that the sand would be used to make the moulds and then when the moulds were undone by the labourers, the sand would be replaced in its piles. This sand was not contained in boxes or anything like that but was simply in a pile resting on the floor against the back wall. There is a conflict of evidence whether there were two or three piles; Mr Thompson said that be put down a third pile when the plaintiff was put on to this work; the plaintiff himself said there were only two piles between the three of them. At all events, there was a pile of sand at the back towards the right-hand side of the plaintiff’s working area, and that was the pile which he was using. I have spoken of the working area of these three respective workmen, but I am satisfied that there were no orders given precisely defining or laying down the area which was to be available for these workmen, and that it was left to them to create and maintain their own working spaces. I have very little doubt that the plaintiff being the man in the middle, and the latest arrival, probably came off rather worse than the other two who had been there some time and had been accustomed to working with only two of them. Different estimates have been given about the width of the area that the plaintiff had available to him. It is said that it was the area between a stanchion and a wall heater, which would have been an area of some 11 to 12 feet wide. The plaintiff himself said that he thought that he had at the front, on the gangway, a width of about 8 feet. At all events, he said that on the day of the accident he started his day’s work, as did all the workmen, by making moulds along the front edge of his space alongside the main gangway with the intention of then working backwards towards the back wall and towards the heap of sand, and he said that the two moulds that he made along the front of this area were the two largest of those that he had been told to make at the outset of that day’s work, and that they were respectively, each of them, 2 feet square—24 inches square.

Now these moulding boxes—and this is an important feature of the case—have

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handles sticking out from the ends of them, although with square boxes, it is difficult to say which is the end and which is the side. There are two handles at each end alongside each other, and it is common ground that they stick out from the end of the box for a distance of 6 inches. Between the handles is what is called a trunnion, which enables the box to be lifted and turned over, which sticks out for approximately the same distance. The plaintiff said that the handles of the two boxes on the front end of his site were about touching, so that if you take two boxes 2 feet each, plus four lots of 6 inches for the handles, that gives you a width of 6 feet of frontage actually occupied by boxes. Mr Hawkins thought he had about 2 feet more than that; about 8 feet.

As the day progressed, having completed the two moulds on the front of his area, he worked back towards the wall and made five or six other smaller moulds; and then about 3.00 pm, according to the plaintiff’s evidence, which I accept, he was told by the foreman to make an eighth mould which was to be 3 feet long by I foot wide. The only space left available to him was right at the back of his working area, nearest to the wall, and in that area was the heap of sand of which I have spoken. The plaintiff told me, and I accept this evidence, that this mould that he was told to make was an awkward shape; that there was not room for it unless he shifted some of the sand, or that there was barely room for it. He said that he did not protest to the foreman, but he cleared the sand so as to make a space and put the mould in as best he could, but he did not think that it was satisfactory. Mr Thomas and Mr Bartlett, who gave evidence, were asked about this, but I will deal with that evidence later on.

It will be readily apparent that with work laid out in this fashion—that is to say, working backwards from a main gangway towards the side wall—sufficient space has got to be left at the sides of the working space, or in the middle, to carry down molten metal to pour into the moulds which are towards the back. The way in which the metal is carried is in what is called a hand shank and this consists of a metal bowl, lined with refractory material, weighing when empty about 50 lb, with two handles, each 4 feet long, extending from the opposite sides of it and the handles at the ends spread out, rather like the handles of a bicycle, and then there are two straight pieces in the same line as the main part of the handle which can be used to grip, and I am told those two pieces are 19 inches apart. With the shank bowl filled with a reasonable amount of metal, the whole thing will weigh about 11/2 cwts.

What happens when it is time to pour the mould is that the hand shank containing hot metal is brought from elsewhere to the working area by two labourers and set down in the main gangway. One of the labourers then goes away, but the other remains there. The moulder then takes the handle at one end and the remaining labourer takes the handle at the other and they proceed to the place where the metal is to be poured. Since, as I shall shortly describe, the passage, or route, which they have to follow is down a narrow alleyway or passage, the only way in which they can proceed (and it is not suggested by the defendants that there is any other way or that the plaintiff was in any way at fault in adopting this method) is that one of them shall go backwards, or lead going backwards, and the other, at the rear end, shall walk forwards. That is what was done in this case; the plaintiff went backwards and the labourer went forwards. The labourer was a young Indian called Mr Singh who was aged 17 years, who was an untrained labourer and who spoke in different English.

The moment came when the plaintiff desired to pour metal into the final mould, that 3 feet X 1 foot mould, which he had at 3.00 pm been instructed to make. It was about 4.00 pm when he went to pour the metal. He and Mr Singh lifted the hand shank and they started off down the passageway between the plaintiff’s working area and that occupied by Mr Thomas. They successfully traversed most of the distance but, when they came up to the last mould, that in the last row, the 3 feet X 1 foot mould, the plaintiff felt his left ankle as he was walking backwards

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come up against the handle of that moulding box. Either just before or at the moment when he felt his foot touch this handle, he shouted some words that were intended to make Mr Singh stop, but Mr Singh continued to walk forward, the plaintiff lost his balance and fell backwards, falling over the mould itself, with his head and shoulders on to the floor on the far side of the mould—he must have fallen slightly sideways over the end of the mould—the molten metal was spilt and some of it went on his foot.

Now, the passageway down which it was necessary for them to carry this hand shank containing molten metal was bounded on one side by the plaintiff’s own work and, on the other side, as I have found, by empty moulding boxes, and I dare say other material, which, for the convenience of the workmen, Mr Thomas and, I expect, the plaintiff, too, had stacked or left on that part of the working area, and I am satisfied that neither of those two boundaries was absolutely straight. What the width of it was during the initial part of it—that is to say, the first few feet going away from the gangway—I do not know. There has been no clear evidence on the point and it does not matter. What I have to find is what the width of it was at the point where the plaintiff tripped, and I have no doubt, on the evidence, that at that point, if one takes into account the handle of the moulding box in the back row, it was less than 18 inches wide.

I accept the evidence of Mr Bartlett, I think it was, who was on the scene very shortly after the accident and who directed his mind to this very point. He said that between handles—that is to say between the handles of the box I was speaking about and the handles of the empty box on Mr Thomas’s side of the passage—was almost exactly the width of his two feet; that he could stand sideways on with his feet on the ground, side by side, and that just about took up the space between the two sets of handles. He thought that that distance was about 15 inches, but it seems to me unlikely that any man’s feet would be as wide as that and I should have thought that the width of a pair of feet side by side—and Mr Bartlett is a man of very normal height—was at the most 12 inches. At any rate, I am satisfied that it was less than 18 inches.

Now, why is it less than 18 inches? I am satisfied, on the evidence, that the plaintiff had so placed this final box that it, to some extent, stuck out further towards the empty boxes lining Mr Thomas’s working place than did the other boxes nearer the front of the plaintiff’s working area. By how much it is impossible to say, but it did, according to the evidence of both Mr Bartlett and Mr Thomas, stick out to some extent. I am quite satisfied that the reason why it did so was that there really was, in practical terms, no other place where Mr Hawkins could have put it. Apart from the answers I have read, he was not asked about this because the importance of the point had not then emerged. Mr Thomas was not able to help very much, although he did say in re-examination that the plaintiff could not have put it anywhere else. Mr Bartlett was asked and he also said that the plaintiff put the box in the only possible place and what he meant by that was that he could not have put it any further across away from Mr Thomas’s area without moving the heap of sand, or moving a substantial part of the heap of sand, which was quite properly in position on the working area. Mr Bartlett also said he would have had to move some boxes and I think Mr Bartlett gave the quantity of sand which would have had to be moved as in terms of some barrow-loads.

At first sight it would seem that if the plaintiff’s working area had been of a constant width throughout, and had been 8 to 12 feet in width all the way back, there was no reason why he should not have put a 3-foot mould in the centre of his area well away from anywhere where it could cause anybody to stumble. It is common ground that there was to be only one mould in that back row. But when one considers the effect of the presence of the sand and the evidence of Mr Bartlett (which I accept), I have come to the conclusion that if the plaintiff was to carry out the orders given to him by the foreman without unreasonable delay, there really was nowhere

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else where he could put that box. To have put it any further over towards Mr Bartlett’s side would have involved some of the labourers moving quite a quantity of sand out of the area altogether and moving boxes, and although, in theory, that was possible, I am satisfied that it was not reasonable to expect the plaintiff to ask for that to be done and I do not believe that the foreman would have expected him to ask for that to be done. I am satisfied that the handle that he tripped over was the handle of that moulding box and that he fell over it because into this narrow passageway there obtruded the handles of this box and that the handles reduced the width of the available passageway to something in the region of 12 inches, narrowed it below what it had been nearer to the gangway and that it was for that reason that the plaintiff, walking backwards, as he was, came up against the handle with his left ankle.

In his statement of claim there are very numerous allegations of negligence and of breach of statutory duty. I am going to base my decision on one matter only, and I shall not find it necessary to make findings on all the 18 allegations of negligence which are made, but I should say this, that six of the allegations of negligence are allegations of vicarious liability for negligence by Mr Singh, the other labourer. I do not consider that any such case is made out, but I do think that it is a relevant factor in the whole situation, against which the other allegations of negligence have got to be considered, that it was a young, untrained Indian labourer who was to be carrying the other end of this shank, and, although I find nothing improper in the employment of Mr Singh for that purpose, if such labourers are to be used for this work then that casts light on the standard of care to be followed by the employers in the layout of the work and in the steps which they take to make sure that people do not meet with accidents when they are carrying molten metal.

The relevant allegations are to be found in paras 1, 4 and 8 of the particulars of common law negligence and, more particularly, in the allegations of breach of statutory duty. The particular provisions which are said to have been broken are those of reg 4(a) of the Iron and Steel Foundries Regulations 1953b, and regs 6(1) and 6(2) of the same regulations and ss 28 and 29(1) of the Factories Act 1961. It is accepted that the foundry in which the accident occurred is a place to which the regulations apply and, furthermore, is a workroom to which reg 6(2)(a) applies and is not a workroom of which the floor by reason of the nature of the work done therein has to be of sand. If it was then, by para (c) of that regulation, reg 6(2) would not apply, but it is agreed that it is not, so that reg 6(2) does apply.

I do not need to consider reg 4(a) or ss 28 or 29, although I must not be taken to be finding that there was no breach of those sections, because I am satisfied that there was a breach of reg 6(2) and that that breach was a cause, if not the cause (and I shall have to consider that question later), of the accident. I need not consider reg 6(1) either. Regulation 6(2)(a) provides (omitting immaterial words):

‘… sufficient and clearly defined pouring aisles shall be provided and properly maintained which—(i) shall have an even surface of hard material and shall, in particular, not be of sand or have on them more sand than is necessary to avoid risk of flying metal from accidental spillage; (ii) shall be kept so far as reasonably practicable free from obstruction; (iii) shall be wide enough not to imperil the safety of persons carrying or pouring molten metal and shall in no case be less than eighteen inches in width.’

It is to be noted that the only part of that regulation in which the words ‘so far as reasonably practicable’ occur is sub-para (ii) and that those words are absent from the remainder of reg 6(2)(a). Accordingly, it is accepted by counsel for the defendants, that there is an absolute duty on the defendants to provide and maintain sufficient

Page 187 of [1970] 1 All ER 180

and clearly defined pouring aisles which are wide enough not to imperil the safety of persons carrying molten metal and are in any case not less than 18 inches in width, and that it is no answer to a claim for breach of that regulation to say that it is difficult, or impossible, to comply with that regulation.

Both sides have called expert witnesses who have said that it is impossible to mark out on a floor of a workshop like this lines as on a tennis court to define pouring aisles, because the floor has to be covered by sand. There is an additional difficulty that, since the sizes of the moulds to be made are different and the nature of the work will differ from day to day, it will, at any rate, be lavish of space, if nothing else, to allocate as pouring aisles strips across the floor. Counsel for the defendants has submitted that it is a sufficient compliance with that regulation, in circumstances such as this, to leave to these experienced and highly skilled workmen, the responsibility of leaving sufficient passageway (which will differ from day to day) around the moulds which they happen that day to be making.

I do not take that view of the regulations, and, difficult though it may be, it seems to me that Parliament clearly has required that employers shall define pouring aisles and I can see no difficulty, for instance, in the present case, in having vertical markers on the back wall 18 inches or more apart and providing that the strip of floor leading from the main gangway up to those markers is to be kept clear as a pouring aisle. If that were done it would, of course, mean that on occasions the aisle would be wider than necessary since the moulds might be small ones, not coming right up to the edge of the pouring aisle. But that would not be a breach of the regulation and the sort of method I have suggested would ensure that the regulation was complied with.

It does not seem to me that the employers in this case have really done anything to define pouring aisles—an expression which I should say is defined in the regulations as meaning an aisle leading from a main gangway or directly from a cupola or furnace to where metal is poured into moulds. Nor have the employers done anything properly to maintain defined pouring aisles.

Furthermore, it seems to me clear on the evidence that such pouring aisle as there was between the plaintiff’s moulds and the empty boxes dividing his area from Mr Thomas’s was not ‘wide enough not to imperil the safety of persons carrying molten metal’. As I have found it was in places less than 18 inches in width, but even if it had been 18 inches in width, that does not necessarily mean that the employers have complied with their obligation under the regulation because there may well be cases—for instance, if there are stacks of boxes say 3 or 4 feet high on one side of the aisle—where an aisle of more than 18 inches is necessary if the safety of persons carrying molten metal is not to be imperilled. As I have said, the handles of these hand shanks are 19 inches apart so that the use of such a hand shank would require a passage wider than 18 inches if there were boxes or other objects lining it up to the height at which the hands of the persons carrying the shanks would be.

Furthermore, it seems to me clear that such aisle as there was was not free from obstruction in that it was obstructed by the handles of the 3 feet X 1 foot moulding box, and that, if the employers had so desired, they could have so arranged the plaintiff’s work that that alleyway was kept free from obstruction.

I have already indicated that I do not think that the plaintiff himself could have been expected to refrain from carrying out the instruction he was given even though this involved the handles sticking out into the aisle, but it seems to me that it was reasonably practicable from the defendants’ point of view either to refrain from ordering him to make that final box or to give him some other place in which to make it, or to provide for help to clear the area further; and I find that, in addition to the other matters, there has been a breach of sub-paragraph (ii). I do not think I need elaborate further my reasons for saying that it was the breach of this regulation which was a cause of the accident.

The only matter in this case which seems to me to give rise to difficulty, and which

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I have found difficult to decide, is whether, and, if so, to what extent, the plaintiff himself should be held guilty of contributory negligence. What is said on behalf of the defendants is that it was he himself who placed the offending box where it was; he knew where it was; he knew where the handles were; and that it was negligence on his part to place it there and/or, having placed it there, to allow himself to stumble over it.

It seems to me that in a strict analysis, and applying ideal standards, it would be true to say that the plaintiff had been guilty of a lack of care in relation to himself in the combination of those two respects; principally in the first, in putting the box where, if he had thought about it, he would have said ‘Well, I might stumble over that when I come to pour the metal’. But, it seems to me, that that is applying too high a standard. The law imposes on employers absolute standards in this respect and it does so because in a place like a foundry where people become very used to the work which they are doing and thoughtless of the dangers involved in it, anything less than the compliance with high standards of safety is likely to lead to danger. It seems to me that it is wrong to impute contributory negligence to a man in the position in which the plaintiff was when he is himself the sufferer from the failure of the defendants to carry out the duties which Parliament has imposed on them. It seems to me that in the real world an employee can reasonably be expected to do what the foreman tells him to do even though, on the highest standards of care, he ought to have foreseen that carrying it out in the space which was left available to him might involve him in some risk, and it seems to me that it is wrong to expect of a workman placed as he was the degree of foresight which Parliament has expected of employers by imposing on them these heavy duties. Indeed, it may be said that Parliament has gone further than that in imposing absolute duties on employers and has required them to do things which, it might be said, west beyond what the ordinary common law of negligence would require of them in this instance.

At all events, I have come to the conclusion that this accident was wholly caused by the breach of statutory duty by the defendants, but if I am wrong in that and contributory negligence by the plaintiff was in part a cause of this accident, then I am of opinion, applying the words of s 1 of the Law Reform (Contributory Negligence) Act 1945 that in all the circumstances of the case as I have outlined them, it is not just or equitable to reduce the damages, having regard to the plaintiff’s share in the responsibility for the damage. [His Lordship then referred to the plaintiff’s injuries and their effect on his future earning capacity and assessed general damages at £500; special damages of £225 having been agreed.]

Solicitors: W H Thompson (for the plaintiff); Brain & Brain, Reading (for the defendants).

E H Hunter Esq   Barrister.

Huckerby v Elliott

[1970] 1 All ER 189

Categories:        LEISURE AND LICENSING        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        LORD PARKER CJ, ASHWORTH AND CANTLEY JJ        

Hearing Date(s):        30 OCTOBER 1969        

Gaming – Gaming licence – Offence by body corporate committed with consent, etc, of director, etc – Offence attributable to neglect – Obtaining of licence left to co-director – Liability of directors – Customs and Excise Act 1952, s 305(3) – Finance Act 1966, s 13(1).

A company was charged with being a provider of premises used for the purpose of gaming without being the holder of an appropriate licence under s 13(1)a of the Finance Act 1966. The company pleaded guilty. L, the secretary and a director of the company, was charged with an offence against s 305(3)b of the Customs and Excise Act 1952, in that the above offence was committed with his consent. He also pleaded guilty. The appellant, also a director of the company, was charged with an offence against s 305(3) in that the offence was attributable to her neglect. She pleaded not guilty. At the hearing the prosecution relied on a formal written admission of facts which included a transcript of an interview with the appellant by an officer of HM Customs and Excise. From this it was clear that the appellant knew little of the conduct of the premises in question; this had been left in the hands of L, her fellow director. Although she was aware that a gaming licence was required and she knew that money had been made available for licences, she had no knowledge whether or not the gaming licence for the premises had been obtained. No other evidence was adduced.

Held – The prosecution had failed to show that the offence was attributable to any neglect on the part of the appellant for a director could properly leave certain matters to another director or official of the company; the appellant had left licences for L to deal with and, on the evidence, she had no reason to distrust him and she could not be said to have neglected her duty merely because she failed to make a specific enquiry in relation to whether a gaming licence had been obtained (see p 194 c and d, and p 195 b and c, post).

Dictum of Romer J in Re City Equitable Fire Insurance Co Ltd [1925] Ch at 428–430 applied.

Observations on the duty of directors in regard to the day-to-day running of a company (see p 194 b, and p 195 c, post) and (per Ashworth J) on the duty of directors to see that the law is observed (see p 194 j, to p 195 a, post).

Notes

For lawful and unlawful gaming, see Supplement to 18 Halsbury’s Laws (3rd Edn) para 369A, 1, 2, 3, 5 and 7.

For negligence of directors of a company, see 6 Halsbury’s Laws (3rd Edn) 309, 310, para 619, and for cases on the subject, see 9 Digest (Repl) 489–492, 3213–3236.

For the Customs and Excise Act 1952, s 305, see 9 Halsbury’s Statutes (3rd Edn) 202.

For the Finance Act 1966, s 13, Sch 3, para 21, see 14 Halsbury’s Statutes (3rd Edn) 668, 682.

Case referred to in judgment

City Equitable Fire Insurance Co Ltd, Re [1925] Ch 407; on appeal [1925] Ch 407, [1924] All ER Rep 485, 94 LJCh 445, 133 LT 520, 9 Digest (Repl) 489, 3217.

Page 190 of [1970] 1 All ER 189

Case stated

This was a case stated by the stipendiary magistrate for the city of Leeds (J H E Randolph Esq) in respect of his adjudication as a magistrates’ court sitting at Leeds, on 12 November 1968, in respect of an information against the appellant, Mavis Huckerby, and also for informations against Frank Selwyn Lunn, Windmill Clubs Ltd, John Beveridge and Antonios Athanasiou.

On 16 September 1968, at the magistrates’ court sitting at the Town Hall, Leeds, an information was preferred by the respondent, Andrew Smith Elliott, one of HM officers of Customs and Excise, against the appellant charging that Windmill Clubs Ltd, a body corporate whose registered office was situated at Lovell House, 97 North Street, Leeds 1, on 26 May 1968 at the New Embassy Club at 107 Kirkgate, Leeds, was the provider of the New Embassy Club premises which were used for the purposes of gaming by way of a game to wit chemin de fer to which s 13 of the Finance Act 1966 applied without the body corporate as provider of the premises being the holder of the appropriate gaming licence in respect of those premises in contravention of s 13(1) of the Finance Act 1966 and para 21(1)(a) of Sch 3 to the Finance Act 1966 (being an enactment relating to an assigned matter namely gaming licences) and that the aforesaid offence of the body corporate was attributable to the neglect of the appellant as a director of the body corporate whereof she as well as the body corporate should be deemed to be guilty of the offence and should be liable to be proceeded against and punished accordingly by virtue of s 305(3) of the Customs and Excise Act 1952.

At the hearing of the information the appellant pleaded not guilty. A similar information was also preferred on 16 September by the respondent against Frank Selwyn Lunn, the secretary and a director of Windmill Clubs Ltd, charging him that the offence of Windmill Clubs Ltd on 26 May 1968 was committed with his consent as secretary of the body corporate whereby he as well as the body corporate should be deemed to be guilty of the offence and should be liable to be proceeded against and punished accordingly by virtue of s 305(3) of the Customs and Excise Act 1952, to which information he pleaded guilty. On 16 September 1968, on information was preferred by the respondent against Windmill Clubs Ltd, charging the limited company that on 26 May 1968 it was the provider of premises known as the New Embassy Club contrary to para 21(1)(a) of Sch 3 to the Finance Act 1966 which premises were used for the purpose of gaming by way of a game of chance to wit chemin de fer without being the holder of an appropriate gaming licence in contravention of s 13(1) of the Finance Act 1966, to which information Windmill Clubs Ltd pleaded guilty.

On 16 September 1968, informations were also preferred by the respondent against John Beveridge and Antonios Athanasiou charging them respectively that on 26 May 1968 they were persons concerned in the management of gaming, contrary to para 21(1)(a) of Sch 3 to the Finance Act 1966, at the premises of the New Embassy Club which were used for the purpose of gaming by way of a game to wit chemin de fer to which s 13 of the Finance Act 1966 applied without the provider to wit Windmill Clubs Ltd of the premises being the holder of an appropriate gaming licence in contravention of s 13(1) of the Finance Act 1966, to this information both John Beveridge and Antonios Athanasiou pleaded guilty.

The evidence relied on by the respondent was contained in a formal written admission of facts duly signed and made under s 10 of the Criminal Justice Act 1967.

It was submitted on behalf of the appellant that there was no case to answer. The magistrate ruled that there was a case to answer. Counsel for the appellant said that he was calling no evidence on behalf of the appellant. It was contended by the respondent that the offence was established. The magistrate was satisfied that the offence was established. He gave the following oral judgment after the conclusion of argument for the appellant and for the respondent:

‘When one considers the position of a director of a company under s 305(3)

Page 191 of [1970] 1 All ER 189

of the Customs and Excise Act 1952, it is obvious that such director is deemed to be guilty of an offence committed by the company if it is proved that the offence was committed with the consent of the director or with his connivance or is attributable to any neglect on his part. It would seem that where a director consents to the commission of an offence by his company, he is well aware of what is going on and agrees to it. Where he connives at the offence committed by the company he is equally well aware of what is going on but his agreement is tacit, not actively encouraging what happens but letting it continue and saying nothing about it. Where the offence is “attributable to neglect”, in the absence of authority on the point it would seem to me that the offence which is being committed may well be without his knowledge but it is committed in circumstances where he ought to know what is going on and he fails to carry out his duty as a director to see that the law is observed. It is to be noted that, before a director could be liable to penalties, the offence committed by the company must be attributable to the failure of that director to carry out his duties. In this particular case, all I know is that the company Windmill Clubs Ltd, of which [the appellant] is a director, did use the premises on 26 May 1968 for the purpose of gaming without holding a licence in respect of those premises. So far as [the appellant’s] knowledge of the matter goes, it appears that her knowledge was sketchy in the extreme as appears from the last page of the agreed statement of facts. She did not know how long the particular game of chemin de fer had been played at the New Embassy Club—this is the club which in fact uses these premises of which Windmill Clubs Ltd hold the assignment of the lease—and so far as there being in existence a gaming licence for the New Embassy Club, her knowledge was simply this: she knew that £1,600 had been paid by Windmill Clubs Ltd for licences and she assumed that part of that money covered the licence for the New Embassy Club. It is quite obvious from the last reply which she gave that she had done nothing to check that her assumption was accurate, still less to see that the money that was properly due to the revenue authorities had been paid to them. The question is—is the offence committed by Windmill Clubs Ltd attributable to neglect on her part to see that the law had been complied with?

‘I know from looking at the admitted statement of facts in this case that other people were concerned in the running of the club, for example, Mr Lunn the secretary of the company; he is in fact pleading guilty to allowing gaming to go on in these premises without a gaming licence. As the secretary of the company he was, I would imagine, more in touch with affairs than [the appellant] was on her own showing. How can I say that this offence was attributable to her neglect rather than to his neglect to carry out his duties? Mr Lunn agreed to what was going on. It is a point which I find difficult indeed to decide because of a complete lack of evidence on the matter one way or the other, but it does seem to me that, even if a secretary of the company had taken it upon himself to break the law, it must surely be for the director of that company to exercise some degree of control over what is going on or there is no point in being a director. To escape liability by saying “I have delegated all my duties to a servant” seems to me to make nonsense of the position of a director. I felt this: that a servant of a company, for example in the position of secretary, is more likely to be encouraged in breaking the law if he knew that his superiors as directors are slack or lax in their supervision of the company. Similarly, a secretary and director may be inclined to consent to the commission of an offence if he knows that his fellow directors are not supervising the running of the company properly. If that state of affairs exists then the neglect of the directors to carry out their duties is clearly leading to the commission of the offence, albeit indirectly, and clearly the commission of the offence is attributable to neglect on the part of the directors.

Page 192 of [1970] 1 All ER 189

‘The conclusion which I have come to on these facts is that [the appellant] must be guilty of the offence committed by the company because I thought it was attributable to her neglect as a director.’

The magistrate ordered the appellant to pay a fine of £75. The appellant now appealed.

J Hampton for the appellant.

Gordon Slynn for the Crown.

30 October 1969. The following judgments were delivered.

LORD PARKER CJ. By s 13(1) of the Finance Act 1966 it is provided:

‘There shall be charged a duty of excise on a licence (to be known as a gaming licence) authorising the use of premises specified in the licence for the purpose of gaming … (b) by way of bingo or any other game to which this section for the time being applies; and … no premises situated in Great Britain or within the limits of the territorial waters of the United Kingdom adjacent to Great Britain shall be used for the purpose of gaming [in that way] unless a provider of the premises is the holder of the appropriate gaming licence … ’

By s 13(5) there are set out the games to which the section applies and which include, and this is the only relevant one in this case, ‘chemin de fer’. Finally, so far as this Act is concerned, para 21(1) of Sch 3 provides:

‘If any premises are used for the purposes of gaming in contravention of section 13(1) of this Act—(a) any provider of the premises and any person concerned in the organisation or management of the gaming shall each be liable … ’

Thereafter there are set out certain penalties according to whether there is a summary conviction or a conviction on indictment.

Finally, by s 305(3) of the Customs and Excise Act 1952 it is provided:

‘Where an offence under any enactment relating to an assigned matter which has been committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate or any person purporting to act in any such capacity, he as well as the body corporate shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.’

Against that background, this case discloses that a company called Windmill Clubs Ltd ran a gaming club at which chemin de fer was played, at premises known as the New Embassy Club. Windmill Clubs Ltd was a provider and there was no gaming licence. In the result an information was laid against the company and when the matter came before the stipendiary magistrate for the city of Leeds, the company pleaded guilty. At the same time as that information was preferred against the company, further informations were preferred; there was one against Frank Selwyn Lunn, who was a director of Windmill Clubs Ltd, and also the secretary, alleging that the offence committed by Windmill Clubs Ltd had been committed with his consent whereby he was also liable under s 305 of the Customs and Excise Act 1952; he pleaded guilty. Informations were also preferred against one John Beveridge, who was in fact the manager, and one Antonios Athanasiou, both as being persons concerned in the management of gaming as people who had acted contrary to para 21(1) of Sch 3, and they also pleaded guilty. Finally, and this is the matter which is raised in this case today, an information was preferred against one Mavis Huckerby, who is the appellant, who was also a director, one of the two directors of the company, alleging that the offence committed by Windmill Clubs Ltd was

Page 193 of [1970] 1 All ER 189

attributable to the neglect of the appellant as a director of that body corporate whereby it was alleged that she was equally guilty with the company, again by reason of s 305 of the Act.

In due course she was convicted by the stipendiary magistrate, and it is against that decision that she now appeals by way of case stated. In fact at the trial no evidence was offered; statements of facts had been agreed, and those formed the case for the prosecution and no evidence was called for the defence. That written evidence consisted of certain admissions in regard to the Windmill Clubs Ltd’s control of this gaming club and the fact that there was no licence, and the fact that Frank Selwyn Lunn was the secretary. There was an agreed transcript of an interview which took place with the appellant in the presence of her solicitor conducted by an officer of the customs and excise. I find it unnecessary to read the questions and answers set out in that transcript, but it quite clearly disclosed that although she was a director, she knew very little about the conduct of the New Embassy Club; it was quite clearly left to Mr Lunn who was, as I said, not only the secretary but her co-director, and to Mr Beveridge, who was the manager. She did not, for instance, know how long chemin de fer had been played, and matters concerning, for instance, applications for membership.

There is one relevant question and answer which I must read:

‘Q As you have taken out a gaming licence for the Windmill Club, I take it that you are aware that a gaming licence must be in force in respect of any premises in Great Britain which are used for playing such games as chemmy. Why hasn’t one been taken out for the New Embassy Club? A As far as I know £1,600 has been paid by Windmill Clubs Ltd for licences and I assume that part of that money covered the licence for the new Embassy.’

As I have said, neither the appellant nor anyone on her behalf gave any evidence, and it was on those written statements that the learned stipendiary found the appellant guilty. The relevant part of his decision is as follows:

‘I know from looking at the admitted statement of facts in this case that other people were concerned in the running of the club, for example, Mr Lunn the secretary of the company; he is in fact pleading guilty to allowing gaming to go on in these premises without a gaming licence. As the secretary of the company he was, I would imagine, more in touch with affairs than [the appellant] was on her own showing. How can I say that this offence was attributable to her neglect rather than to his neglect to carry out his duties? Mr Lunn agreed to what was going on. It is a point which I find difficult indeed to decide because of a complete lack of evidence on the matter one way or the other, but it does seem to me that even if a secretary of the company had taken it upon himself to break the law, it must surely be for the director of that company to exercise some degree of control over what is going on or there is no point in being a director. To escape liability by saying “I have delegated all my duties to a servant” seems to me to make nonsense of the position of a director. I feel this: that a servant of a company, for example in the position of secretary, is more likely to be encouraged in breaking the law if he knows that his superiors as directors are slack or lax in their supervision of the company. Similarly, a secretary and director may be inclined to consent to the commission of an offence if he knows that his fellow directors are not supervising the running of the company properly. If that state of affairs exists then the neglect of the directors to carry out their duties is clearly leading to the commission of the offence, albeit indirectly, and clearly the commission of the offence is attributable to neglect on the part of the directors.’

I confess for myself that as a general principle I find those words that I have read much too wide. I cannot think that in general at any rate it is the duty of each director of a company to exercise some degree of control, to use the words in the oral judgment,

Page 194 of [1970] 1 All ER 189

over what is going on, or there is no point in being a director; nor do I think it is right to say that there is a duty to supervise the running of the company and in particular a co-director who is the secretary.

Counsel for the respondent concedes that these words ‘attributable to any neglect on the part of the directors’ refer to the omission to do something which the director was under a duty to do. It is unnecessary to go through the cases which deal with what in different circumstances may or may not be the duty of a director, but I know of no authority for the proposition that it is the duty of a director to, as it were, supervise his co-directors or to acquaint himself with all the details of the running of the company. Indeed it has been said by Romer J in Re City Equitable Fire Insurance Co Ltd ([1925] Ch 497 at 428–430) that amongst other things it is perfectly proper for a director to leave matters to another director or to an official of the company, and that he is under no obligation to test the accuracy of anything that he is told by such a person, or even to make certain that he is complying with the law.

It was pointed out that business cannot be conducted otherwise than on principles of trust, and accordingly as it seems to me on the evidence produced by the prosecution there is disclosed a state of affairs where the appellant left matters concerning the licences to her co-director, Mr Lunn, who was the secretary of the company and fully acquainted with the business. One asks oneself this: has she any reason to distrust Mr Lunn or to feel that he was not carrying out his duty? One finds that she had on the evidence produced no reason to distrust him; indeed as the answer I read out discloses, she knew that he was performing his duty in regard to licences generally, and I can see no further duty on her part to enquire exactly how the £1,600 she referred to had been spent, and whether part of it included a licence for the New Embassy Club in respect of the chemin de fer game. For my part I feel that this is a case in which the prosecution has not proved their case, and accordingly I would allow this appeal and quash the conviction.

ASHWORTH J. I agree and I only venture to add a word or two in particular reference to another passage in the learned stipendiary’s oral judgment. He said first of all in discussing s 305(3) of the Customs and Excise Act 1952 what his views were about three ingredients involved in that section. He dealt with consent and said:

‘It would seem that where a director consents to the commission of an offence by his company, he is well aware of what is going on and agrees to it.’

I agree with the stipendiary and it was on that basis that proceedings were taken against the appellant’s co-director, Mr Lunn. He knew what was going on and he agreed with it and he pleaded guilty. The stipendiary went on:

‘Where he connives at the offence committed by the company he is equally well aware of what is going on but his agreement is tacit, not actively encouraging what happens but letting it continue and saying nothing about it.’

It is enough for me to say that I do not disagree with that, and there has been no argument about that construction of the word ‘connives’, but it is what follows that causes me difficulty:

‘Where the offence is “attributable to neglect”, in the absence of authority on the point it would seem to me that the offence which is being committed may well be without his knowledge but it is committed in circumstances where he ought to know what is going on and he fails to carry out his duty as a director to see that the law is observed.’

Counsel for the respondent adopted that as his main contention, that there was on a

Page 195 of [1970] 1 All ER 189

director of a company a duty to see that the law is observed. For my part I do not accept that as a right contention at all. It seems to me that in effect to express the duty in that way is to make it absolute, and s 305(3) does not quite plainly create an absolute offence involving all the directors of a company and deeming them to be guilty of what the company itself has committed, because it provides for these three ingredients of consent, connivance and neglect. Once one gets away from the premise that neglect means failure to see that the law is observed, one then can approach the matter if I may say so on the lines which Lord Parker CJ has indicated, and in this case I agree that the prosecution failed to show that the appellant was guilty of any neglect to do what she ought to have done. From her answer she knew that the question of obtaining a licence had received the attention of the company, and on the authorities I think that it would be wrong to say that she was neglecting her duty if she failed to make specific enquiry whether a licence had been obtained for the New Embassy Club. For these reasons given by Lord Parker CJ in addition to those just stated I agree that this appeal be allowed.

CANTLEY J. I agree and have nothing to add.

Appeal allowed.

Solicitors: M Kelvin agent for K C Cohen & Rhodes, Leeds (for the appellant); Solicitor, Customs and Excise (for the respondent).

N P Metcalfe Esq   Barrister.

Aristides and another v Minister of Housing and Local Government and another

[1970] 1 All ER 195

Categories:        HOUSING        

Court:        QUEEN’S BENCH DIVISION        

Lord(s):        WILLIS J        

Hearing Date(s):        17 NOVEMBER 1969        

Housing – Clearance area – Compulsory purchase order – Confirmation – Time for submission – Extension of time – Whether Minister under duty to seek views of owners of land within clearance area – Housing Act 1957, s 43(4).

The Minister of Housing and Local Government has no duty to obtain the views of or to consult anyone other than the local authority making the application before he decides whether or not to accede to an application by a local authority for the extension of time for the submission of a compulsory purchase order to the Minister under the Housing Act 1957, s 43(4)a (see p 199 e, post).

The Minister has been given by Parliament a complete discretion under s 43(4); he is acting, during the exercise of that discretion, administratively as between the local authority and himself, and there are no grounds on which the High Court can interfere with his decision to grant an extension of time (see p 199 h, post).

Notes

For the power of a local authority to purchase land comprised in a clearance area, see 19 Halsbury’s Laws (3rd Edn) 650, 651, para 1048.

For the Housing Act 1957, s 43, see 37 Halsbury’s Statutes (2nd Edn) 355.

Page 196 of [1970] 1 All ER 195

Case referred to in judgment

Brighton (Everton Place Area) Housing Order, 1937, Re, E Robins & Son Ltd’s Application [1938] 4 All ER 446, 108 LJKB 281, 103 JP 13; sub nom Robins & Son Ltd v Minister of Health, Re Brighton (Everton Place Area) Housing Order [1939] 1 KB 520, 160 LT 3, 26 Digest (Repl) 692, 78.

Originating motion

This was a motion by the applicants, Louis Aristides and Stella Chinalla, under the Housing Act 1957, Sch 4, para 2, for the quashing of so much of a compulsory purchase order as related to certain property of the applicants on the ground, inter alia, that the Minister had no power to extend the period for submission of the order for confirmation without giving the applicants an opportunity to show cause why the period should not be extended. The facts are set out in the judgment.

Brian Galpin for the applicants.

Gordon Slynn for the Minister of Housing and Local Government.

17 November 1969. The following judgment was delivered.

WILLIS J. Counsel for the applicants moves in this matter under Sch 4 to the Housing Act 1957 (hereinafter referred to as ‘the Act’), for an order quashing the Greater London Council (Albury Street, Lewisham and Greenwich) Compulsory Purchase Order 1967, so far as it affects the property of the applicants, Louis Aristides and Stella Chinalla, who are the owners of certain property which is included in the compulsory purchase order. The court is empowered under Sch 4 to quash a compulsory purchase order made under Part 3 of the Act, in whole or in part, at the instance of a person aggrieved, if it is satisfied that the order is not within the powers of the Act or that the interests of the applicant have been substantially prejudiced by any requirements of the Act not having been complied with.